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85–441 2013

THE NEED FOR MEDICAID REFORM: A STATE 

PERSPECTIVE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 12, 2013 

Serial No. 113–51 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

WITNESSES

Seema Verma, MPH, Consultant, SVC, Inc. ......................................................... 9 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 82 

Joseph W. Thompson, Surgeon General, State of Arkansas, and Director, 

Arkansas Center for Health Improvement ........................................................ 17 

Prepared statement .......................................................................................... 19 

Answers to submitted questions ...................................................................... 101 

Anthony E. Keck, Director, South Carolina Department of Health and Human 

Services ................................................................................................................. 25 

Prepared statement .......................................................................................... 27 

Answers to submitted questions ...................................................................... 110 

SUBMITTED MATERIAL

Statement of the Rand Corporation, submitted by Mr. Pallone .......................... 59 

Report by the National Alliance on Mental Illness, submitted by Mrs. 

Christensen ........................................................................................................... 65 

Article entitled ‘‘The Oregon Experiment—Effects of Medicaid on Clinical 

Outcomes,’’ New England Journal of Medicine, May 2, 2013, submitted 

by Mr. Burgess ..................................................................................................... 80 

(1) 

THE NEED FOR MEDICAID REFORM: A STATE 

PERSPECTIVE 

WEDNESDAY, JUNE 12, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10 a.m., in room 2322 

of the Rayburn House Office Building, Hon. Joe Pitts (chairman of 

the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Whitfield, 

Shimkus, Murphy, Blackburn, Lance, Cassidy, Guthrie, Griffith, 

Bilirakis, Ellmers, Upton (ex officio), Pallone, Dingell, Capps, 

Schakowsky, Green, Barrow, Christensen, Castor, Sarbanes, and 

Waxman (ex officio). 

Staff present: Gary Andres, Staff Director; Sean Bonyun, Communications Director; Matt Bravo, Professional Staff Member; Julie 

Goon, Health Policy Advisor; Brad Grantz, Policy Coordinator, 

Oversight and Investigations; Sydne Harwick, Legislative Clerk; 

Monica Popp, Professional Staff Member, Health; Andrew 

Powaleny, Deputy Press Secretary; Chris Sarley, Policy Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; Alli Corr, Democratic Policy Analyst; Amy Hall, Democratic Senior Professional Staff Member; Elizabeth Letter, Democratic Assistant Press Secretary; and Karen Nelson, Democratic 

Deputy Committee Staff Director for Health. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. This subcommittee will come to order. The chair will 

recognize himself for an opening statement. 

Medicaid was designed as a safety net for the most vulnerable 

Americans, including pregnant women, dependent children, the 

blind and the disabled. With more than 72 million Americans, or 

nearly one in four, enrolled in Medicaid at some point in fiscal year 

2012, we need to closely examine the quality of care the program 

provides, reduce the cost of the program to both the federal government and the States, and encourage bold, new state innovations to 

better serve this population. 

Those enrolled in Medicaid today face significant difficulties in 

accessing care. According to a recent analysis, while 83 percent of 

physicians are accepting Medicare patients, only 70 percent of physicians are accepting those in the Medicaid program. Other studies 

2 

have shown that compared to those with private insurance, Medicaid beneficiaries find it more difficult to schedule follow-up visits 

after initially seeing a doctor; are twice as likely to report difficulty 

in accessing primary care services including prevention services; 

and are twice as likely to visit the emergency room. Clearly, we are 

failing those most in need of our help. And we are spending enormous amounts of money for substandard care, and in some cases, 

worse outcomes than those with no insurance at all. 

On average, States are spending approximately 25 percent of 

their budgets on Medicaid, and this percentage will only grow as 

the Affordable Care Act’s Medicaid expansion goes into effect in 

many States in 2014. In my home State of Pennsylvania, we are 

already spending nearly one-third of the entire State budget on 

Medicaid alone. This crowds out investments in transportation, 

education, public safety and other vital areas. And over the next 

10 years, the federal share of Medicaid expenditures is estimated 

at $5 trillion, with States spending nearly another $2.5 trillion over 

that same time period. 

Medicaid is in trouble. It has been on the Government Accountability Office’s high-risk list for nearly two decades, and the Office 

of Management and Budget reported nearly $22 billion in improper 

Medicaid payments in 2011. 

But we don’t have to settle for subpar care or limited access and 

exploding costs. Many States have embarked on innovative Medicaid reforms to improve the quality of care and modernize their 

programs, ranging from payment incentives, to coordinated care, to 

consumer-driven options, to added services for their beneficiaries 

and more. This has been possible, in part, through the use of State 

demonstration waivers, but it can take years for the Centers for 

Medicare and Medicaid Services to approve these waivers. We need 

to provide States with the flexibility to pursue these options, not 

lock them in a one-size-fits-all model dictated by Washington. 

Several reforms have been outlined by this committee in a recent 

policy paper issued by Chairman Upton and Senator Hatch. The 

Making Medicaid Work blueprint is a product of significant input 

from the States that merits bipartisan consideration and legislative 

action. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chair will recognize himself for an opening statement.Medicaid was designed 

as a safety net for the most vulnerable Americans, including pregnant women, dependent children, the blind, and the disabled. 

With more than 72 million Americans—or nearly 1 in 4—enrolled in Medicaid at 

some point in fiscal year 2012, we need to closely examine the quality of care the 

program provides; reduce the cost of the program to both the federal government 

and the states; and encourage bold, new state innovations to better serve this population. 

Those enrolled in Medicaid today face significant difficulties in accessing care. According to a recent analysis, while 83% of physicians are accepting Medicare patients, only 70% of physicians are accepting those in the Medicaid program. 

Other studies have shown that, compared to those with private insurance, Medicaid beneficiaries find it more difficult to schedule follow-up visits after initially 

seeing a doctor; are twice as likely to report difficulty in accessing primary care 

services, including prevention services; and are twice as likely to visit the emergency room. 

3 

Clearly, we are failing those most in need of our help. And we are spending enormous amounts of money for substandard care and, in some cases, worse outcomes 

than those with no insurance at all. 

On average, states are spending approximately 25% of their budgets on Medicaid, 

and this percentage will only grow as the Affordable Care Act’s Medicaid expansion 

goes into effect in many states in 2014. 

In my home state of Pennsylvania, we are already spending nearly one-third of 

the entire state budget on Medicaid alone. This crowds out investments in transportation, education, public safety, and other vital areas. 

And, over the next 10 years, the federal share of Medicaid expenditures is estimated at $5 trillion, with states spending nearly another $2.5 trillion over that 

same time period. 

Medicaid is in trouble. 

It has been on the Government Accountability Office’s high-risk list for nearly two 

decades, and the Office of Management and Budget reported nearly $22 billion in 

improper Medicaid payments in 2011. 

But we don’t have to settle for sub-par care, limited access, and exploding costs. 

Many states have embarked on innovative Medicaid reforms to improve the quality of care and modernize their programs, ranging from payment incentives, to coordinated care, to consumer-driven options, to added services for their beneficiaries, 

and more. 

This has been possible, in part, through the use of state demonstration waivers, 

but it can take years for the Centers for Medicare and Medicaid Services (CMS) to 

approve these waivers 

We need to provide states with the flexibility to pursue these options, not lock 

them in a one-size-fits-all model dictated by Washington. 

Several reforms have been outlined by this Committee in a recent policy paper 

issued by Chairman Upton and Senator Hatch. The Making Medicaid Work blueprint is a product of significant input from the states that merits bipartisan consideration and legislative action. 

I look forward to hearing from our witnesses today. 

Thank you, and I yield the remainder of my time to Rep. 

—————————————————. 

Mr. PITTS. I look forward to hearing from our witnesses today. 

Thank you, and I yield the remainder of my time to the vice chair 

of the subcommittee, Dr. Burgess. 

Mr. BURGESS. I thank the chairman for yielding. 

We are here today to discuss Medicaid, and of course, Medicaid 

is a shared federal and State partnership but there are wide differences amongst the States with the populations served and this 

underscores the need for flexibility within the program’s administration. But as we ensure its flexibility, we certainly can’t ignore 

the problems that have perpetually plagued the Medicaid system 

including insufficient access to care for beneficiaries, lack of continuity of care, and rapid growth in the program costs, and I would 

add to that as the chairman rightfully mentioned, the difficulties 

with diversion of funds for activities which might be deemed as inappropriate. I applaud the way the States have implemented innovative reforms but state flexibility will not solve all of the problems 

that we face. 

One of the biggest is Medicaid reimbursement. Medicaid reimbursement rates are already embarrassingly low, forcing many providers to refuse new Medicaid patients. In Texas, only 31 percent 

of physicians in Texas currently accept new Medicaid patients. This 

trend only foreshadows the threat to access for millions of new 

Medicaid beneficiaries beginning next year. To sustain provider 

and plan buy-in, we must demand accountability from both the federal and State partners. That is the purpose of this hearing today. 

That is what we are investigating this morning. I certainly look 

4 

forward to the testimony of our witnesses, and I will yield back to 

the chairman. 

Mr. PITTS. The chair thanks the gentleman and now yields 5 

minutes for an opening statement to the ranking member, Mr. 

Pallone. 

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

More than 70 million Americans depend on Medicaid services 

every year, and recipients are often low-income families or individuals with disabilities with long-term needs who would otherwise 

not have access to insurance because it is unaffordable, unavailable 

or inadequate. Providing affordable health coverage is crucial not 

only to protect the vulnerable population but also to keep health 

care costs down. By providing affordable essential health benefits, 

emergency room visits and hospitalizations, which are more expensive, can be reduced. 

I fought hard to make sure that the expansion of Medicaid was 

included in the Affordable Care Act because it will not only improve access to health care for individuals across the country but 

it will improve States’ economic health as well. While we expect all 

States to participate in the Medicaid expansion because it is an advantageous fiscal arrangement, I am troubled and discouraged that 

there are many who still have not decided to expand. I do believe, 

however, that eventually all States will recognize the importance 

of this provision to the health care system as a whole. 

Nearly half of all States recognize that the Medicaid expansion 

under the ACA is a good deal and have indicated that they will expand, and I anticipate that our witness, Mr. Joe Thompson from 

Arkansas, will share with us why his State opted for expansion. 

And let me tell you that from New Jersey’s perspective, expanding 

Medicaid just makes sense and that is why Governor Christie chose 

to expand. It will save New Jersey billions of dollars while providing care to an estimated 300,000 new Medicaid beneficiaries. 

With all of New Jersey’s pressing needs right now, it is assuring 

that the billions in savings will help us to devote more resources 

towards building our economy and creating jobs. 

Now, while Republicans will tell you that States need greater 

Medicaid flexibility, I would argue that under the current law, a 

great deal of flexibility exists while simultaneously providing a 

baseline of protections for beneficiaries. States have the ability to 

manage the design of their Medicaid programs. Within federal 

guidelines, they can alter benefits or change cost sharing and premiums. The concept that States have significant flexibility in the 

management of their programs is reflected by the fact that States 

when they want to are taking on innovative approaches to improve 

their Medicaid programs. For example, States are experimenting 

with programs to reduce expensive and unnecessary hospital readmissions, programs to improve health and promote prevention 

and medical home models as well. 

So let me talk for a moment about the Republicans’ proposal, 

which I believe has been presented under the guise to provide 

5 

greater flexibility. I am extremely concerned that their proposal 

will simply lead to higher premiums and greater financial burdens 

on low-income elderly or disabled Medicaid beneficiaries. Their call 

for block grants or a per capita cap on future Medicaid funding 

would reduce federal beneficiary protections currently in Medicaid 

since States would be permitted to eliminate benefits or restrict enrollment eligibility. While examining costs and exploring the relationship between the federal government and States is clearly important, we must be sure that we do not strip away protections 

from Medicaid recipients who depend on the program for access to 

quality, affordable health care. 

Thank you, Mr. Chairman. Before I yield, I would like to ask 

unanimous consent to enter into the record an article or testimony, 

I should say, from Carter C. Price from the RAND Corporation on 

expanding Medicaid and the financial options for States. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PALLONE. Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the chair of the full committee, Mr. Upton, 5 minutes for opening 

statement. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

You know, it has been years since President Johnson signed the 

1965 Social Security Amendments into law, and as many historians 

have noted, those high-profile negotiations centered mostly on 

Medicare with Medicaid out of the spotlight. While Medicaid covered approximately 4 million people in the first year, there were 

more than 72 million individuals enrolled in the program at some 

point in fiscal year 2012—nearly one in four Americans. 

Those enrollment figures on their own, and their potential drain 

on the quality of care of the Nation’s most vulnerable folks is cause 

for alarm. But once the President’s health care law is fully implemented, another 26 million more Americans could be added to this 

already strained safety net program. 

Medicaid enrollees today already face extensive difficulties finding a quality physician because, on average, 30 percent of the Nation’s doctors won’t see Medicaid patients, and studies have shown 

that Medicaid enrollees are twice as likely to spend their day or 

night in an emergency room than their uninsured and insured 

counterparts. 

Instead of allowing State and local officials the flexibility to best 

administer Medicaid to fit the needs of their own populations, improve care and reduce costs, the federal government has created an 

extensive, one-size fits-all maze of federal mandates and administrative requirements. With the federal debt at an all-time high, 

closing in on $17 trillion, and States being hamstrung by their exploding budgets, the Medicaid program will be increasingly scrutinized over the next 10 years. Its future ability to provide coverage 

for the neediest kids, seniors and disabled Americans will depend 

on its ability to compete with State spending for other priorities inVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
6 

cluding education, transportation, public safety and economic development. 

Energy and Commerce Committee Republicans remain committed to modernizing the Medicaid program so that it is protected 

for our poorest and sickest citizens. We will continue to fight for 

those citizens because they are currently subjected to a broken system. The program does need true reform, and we can no longer tinker around the edges with policies that add on to the bureaucratic 

layers that decrease access, prohibit innovation and fail to provide 

better health care for the poor. 

In May, last month, Senator Hatch and I introduced Making 

Medicaid Work, a blueprint and menu of options for Medicaid reform that incorporated months of input from State partners and 

policy experts from a wide range of ideological positions. My hope 

is that this morning’s hearing is the next step in discussing the 

need for reform so that we can come together in finalizing policies 

that improve care for our most vulnerable citizens. Washington 

does not always know best. We have a lot to learn from our States, 

and that is what this is all about, and I yield the balance of my 

time to Dr. Cassidy. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

It has been nearly 50 years since President Johnson signed the 1965 Social Security Amendments into law. As many historians have noted, those high profile negotiations centered mostly on Medicare—with Medicaid out of the spotlight. 

Surprising to most, however, Medicaid today covers more Americans than any 

other government-run health care program, including Medicare. 

While Medicaid covered approximately four million people in its first year, there 

were more than 72 million individuals enrolled in the program at some point in Fiscal Year 2012—nearly 1 in 4 Americans. 

Those enrollment figures on their own, and their potential drain on the quality 

of care of the nation’s most vulnerable folks is cause for alarm. But once the president’s health care law is fully implemented, another 26 million more Americans 

could be added to this already strained safety net program. 

Medicaid enrollees today already face extensive difficulties finding a quality physician because, on average, 30 percent of the nation’s doctors won’t see Medicaid patients. Studies have shown that Medicaid enrollees are twice as likely to spend their 

day or night in an emergency room than their uninsured and insured counterparts. 

Instead of allowing state and local officials the flexibility to best administer Medicaid to fit the needs of their own populations, improve care, and reduce costs, the 

federal government has created an extensive, ‘‘one-size fits-all’’ maze of federal mandates and administrative requirements. 

With the federal debt at an all-time high, closing in on $17 trillion and states 

being hamstrung by their exploding budgets, the Medicaid program will be increasingly scrutinized over the next 10 years. 

Its future ability to provide coverage for the neediest kids, seniors, and disabled 

Americans will depend on its ability to compete with state spending for other priorities including education, transportation, public safety, and economic development. 

Energy and Commerce Committee Republicans remain committed to modernizing 

the Medicaid program so that it is protected for our poorest and sickest citizens. We 

will continue to fight for those citizens because they are currently subjected to a broken system. 

The program needs true reform, and we can no longer tinker around the edges 

with policies that add on to the bureaucratic layers that decrease access, prohibit 

innovation, and fail to provide better health care for the poor. 

In May, Senator Hatch and I introduced Making Medicaid Work—a blueprint and 

menu of options for Medicaid reform that incorporated months of input from state 

partners and policy experts from a wide range of ideological positions. My hope is 

that this morning’s hearing is the next step in discussing the need for reform so 

that we can come together in finalizing policies that improve care for our most vulVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
7 

nerable citizens. Washington does not always know best—we have a lot to learn 

from our states. 

Thank you, Mr. Chairman and I yield my remaining time to —————————. 

Mr. CASSIDY. Thank you, Mr. Chairman. 

For 20 years, I have treated patients in a safety-net hospital. For 

20 years, I have seen politicians over-promise and underfund, and 

as I do so, it is the patient that suffers. 

Now, the federal government spends almost half of every dollar 

on health care payments for Medicaid and Medicare. These programs are breaking federal and State budgets and they are 

unsustainable in current form. On behalf of my patients, I know 

that we must change them so that they become sustainable. 

Now, in Washington, Medicare reform has been greatly considered but thoughtful solutions from Medicaid not so much. Now that 

Obamacare has added 20 million Americans to the Medicaid roles, 

it is imperative that Congress begin to address the sustainability 

of this important safety-net program. 

Now, I will say I think that States are the best innovators for 

cost containment, far better equipped to offer thoughtful solutions 

addressing unique patient needs. One size does not work. The federal government should construct thoughtful incentives encouraging States to take an active role in restructuring Medicaid. I am 

pleased that the Energy and Commerce Committee has started to 

shed light beginning with this hearing. I look forward to hearing 

from the witnesses today, and I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Waxman, 5 minutes 

for opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. I want to thank you for 

holding this hearing. I welcome and look forward to hearing from 

all our witnesses today. I am particularly interested in the testimony of Mr. Thompson of Arkansas on how his State has been 

working to reform the delivery system and how the Affordable Care 

Act will positively affect his State’s residents. 

There are different paths we can take to ensure long-term health 

and to promote innovation and efficiency within the Medicaid program. States can and do innovative actions today, and they do it 

without undermining critical protections for patients. 

On the other hand, what my Republican colleagues have proposed in their two recently released reports is a cost shift to States, 

patients and providers, and abdication of federal responsibility. 

Block grants, per capita caps and increases in beneficiary premiums and copays do not reduce health care costs; they simply 

shift costs on to the beneficiaries, the providers and the States, and 

they make it less likely that people will be able to access care when 

they need it. 

The Medicaid program operates with efficiency. Medicaid costs 

are nearly four times lower than average private plans. Over the 

next decade, annual Medicaid per capita costs are expected to grow 

by only 3.2 percent compared to 6.9 percent in the private market. 

8 

Additionally, the Congressional Budget Office’s most recent estimates of projected Medicaid spending have dropped by $200 billion 

through 2020. This refutes the claim that burgeoning Medicaid 

spending is compromising the program’s mission and therefore necessitates funding redesign and cost shifting to our Nation’s most 

vulnerable. 

Let us face the realities at hand and not myths. The issues are 

that millions of Americans who were previously shut out of having 

insurance, particularly the working poor, will now have access to 

Medicaid coverage beginning in 2014. 

Unfortunately, a number of States have not yet opted to provide 

insurance coverage for their residents. A RAND study estimates 

that these States will leave 3.6 million people uninsured, and these 

people will continue to seek high-cost services in the emergency department of a hospital and experience increased hospitalizations 

from lack of primary and preventive care. As a result, the study estimates that these States should expect to spend $1 billion more 

annually on uncompensated care. So much for the States that 

choose not to cover their very poor people under Medicaid even 

with 100 percent federal financing for the first several years. 

There are things we could do to improve the program. Certainly, 

for example, we should extend the Medicaid primary care payment 

increase that is helping bring Medicaid rates on par with Medicare 

rates. Any member concerned about access to doctors for Medicaid 

beneficiaries should surely embrace that. Additionally, we can continue to improve care for the dual eligibles who comprise 15 percent of the Medicaid population but account for nearly 40 percent 

of its expenditures. We can target prevention including obesity and 

smoking to keep people healthy. 

The alternative path that we began in 2010 with passage of the 

Affordable Care Act is entitlement reform in a thoughtful way 

through delivery system reform that improves both efficiency and 

quality. The Affordable Care Act includes incentives to reward physicians and other providers for better coordinating care and improving health. It also includes policies to cut waste and inefficient 

care. But above all, it improves access to care, particularly preventive care, that saves dollars and lives. 

Reviewing the facts, we see that health reform is entitlement reform. It is this kind of reform that builds a better health care system for all Americans at the same time that it lowers costs and 

helps support the long-term sustainability of our public health care 

programs. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentleman. That concludes our 

opening statements. We have one panel with us today, three witnesses. I will introduce them at this time. 

On our panel today, we have Ms. Seema Verma, consultant with 

the Strategic Health Policy Solutions. We have Dr. Joseph Thompson, Surgeon General of the State of Arkansas, Director of the Arkansas Center for Health Improvement, and we have Mr. Tony 

Keck, Department of Health and Human Services from the State 

of South Carolina. 

Thank you each for coming. Your written testimony will be made 

a part of the record. You will be given 5 minutes to summarize 

9 

your testimony. So at this time, the chair recognizes Ms. Verma for 

5 minutes for opening statement. 

STATEMENTS OF SEEMA VERMA, MPH, CONSULTANT, SVC, 

INC.; DR. JOSEPH W. THOMPSON, SURGEON GENERAL, 

STATE OF ARKANSAS, AND DIRECTOR, ARKANSAS CENTER 

FOR HEALTH IMPROVEMENT; AND ANTHONY E. KECK, DIRECTOR, SOUTH CAROLINA DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

STATEMENT OF SEEMA VERMA 

Ms. VERMA. Good morning, members of the committee. My name 

is Seema Verma. I am the President of SVC, Inc., a policy consulting company, and in this role have been advising governors’ offices, State Medicaid programs and State departments of health 

and insurance. I have worked in a variety of States including Indiana, South Carolina, Maine, Nebraska, Iowa and Idaho. I am also 

the architect of former Indiana Governor Mitch Daniels’ Healthy 

Indiana Plan, the Nation’s first consumer-directed health plan for 

Medicaid beneficiaries. 

Designed in 1965 for our most vulnerable populations, the Medicaid program has not kept pace with the modern health care market. Its rigid, complex rules designed to protect enrollees have also 

created an intractable program that does not foster efficiency, quality or personal responsibility. The impact of these issues is more 

pronounced as States are entrenched in the fierce debate around 

Medicaid expansion. Reluctance to expand is not indifference to the 

plight of the uninsured, but trepidation for the fiscal sustainability 

of the program and knowledge that expanding without reform will 

have serious consequences on Medicaid’s core mission to serve the 

neediest of Americans. 

Medicaid comprises nearly 24 percent of State budgets, and its 

costs are growing. This is due to growth, population demographics 

and federal requirements. The aging baby boomer population will 

soon require expensive long-term care. The Affordable Care Act requires maintenance of effort and implementation of hospital presumptive eligibility, modified adjusted gross income that eliminates 

asset tests for the non-disabled, and the ACA insurer tax will cost 

States an estimated $13 to $14.9 billion. Additionally, there is the 

clawback provision burden where States have an unprecedented requirement to finance the Medicare program. 

Despite growing outlays of public funds, a Medicaid card does not 

guarantee access or quality of care. In a survey of primary care 

providers, only 31 percent indicated willingness to accept new Medicaid patients. In 2012, 45 states froze or reduced provider reimbursement rates. Medicaid access issues are tied to undercompensation of providers. On average, Medicaid payments are 66 percent of Medicare rates and many providers lose money seeing Medicaid patients. Medicaid beneficiaries struggle to schedule appointments, face longer wait times and have difficulty obtaining specialty care. These access challenges will be more pronounced as 

Medicaid recipients compete with the tens of millions of newly insured under the ACA. Studies also show Medicaid coverage does 

not generate significant improvements in health outcomes, deVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
10 

crease emergency room visits or hospital admissions, and participants have higher ER utilization rates than other insured populations. 

At Medicaid’s core is a flawed structure. While jointly funded, by 

the federal and state governments, it is not jointly managed. States 

are burdened by federal policy and endure lengthy permission processes to make routine changes. Notwithstanding the cumbersome 

procedure, 1115 waivers provide a pathway for State innovation. 

However, the approval route is so daunting that States often abandon promising ideas if a waiver is necessary. Absent are evaluation 

guidelines, required timelines, and there is a capricious nature to 

the approvals, as waivers do not transfer from one State to another. Even with positive outcomes, a new Administration has the 

authority to terminate a waiver. Despite intense federal oversight, 

results vary substantially and there are no incentives for States to 

achieve quality outcomes. For example, the average cost to cover an 

aged Medicaid enrollee is roughly $5,200 in New Mexico versus almost $25,000 in Connecticut, and annual growth rates also very. 

Replacing oversight of day-to-day administrative processes, the federal and State governments should collaborate to identify program 

standards and incentives. States should be provided with flexibility 

to achieve these goals, and successful States should be rewarded 

with reduced oversight. 

Medicaid’s uncompromising cost-sharing policies are illustrative 

of a key failure. These regulations disempower individuals from 

taking responsibility for their health, allow utilization of services 

without regard for the public cost, and foster dependency. While 

some policies may be appropriate for certain populations, in an era 

of expansion to non-disabled adults, they must be revisited. Revised cost-sharing policies should consider value based benefit design and incent enrollees to evaluate cost, quality and adopt positive health behaviors. Indiana’s Healthy Indiana Plan waiver applied principles of consumerism with remarkable results, lowering 

inappropriate ER use and increasing prevention. 

Congress should reform Medicaid to assure long-term fiscal sustainability and access to quality services that improve the health 

of enrollees. A fundamental paradigm shift in management is required and the program should be reengineered away from compliance with bureaucratic policies that do not change results to aligning incentives for States, providers and recipients to improve outcomes. States are positioned to develop policies that reflect the 

local values of the people they serve and should be given the flexibility to do so. Thank you. 

[The prepared statement of Ms. Verma follows:] 

11 


85441.001

Medicaid has W'UUUl)IIt!CIIY access health 

care for nation's most vulnerable nnl,"I~til'n< There is 

However, designed in 1965 the program has not 

market. Its rigid, complex rules designed to protect 

does not foster efficiency, quality or personal respoinsiloililty 

state costs have not translated into 

care 

that 

Escalating 

Failure to reform the program will jeopardize states' was envisioned to 

serve low While the 

program is jointly funded by the state federal government, managed. States are 

largely dependent on operate 

Admilnisl:ral:ive review processes add layers of administrative bureaucracy to program 

thwart states' ability to 

Notwithstanding the cll,nhersomlf' regulatory review process, are many examples 

innovation that have To transform states must be given the and 

opportunity without these federal constraints. Reform 

mllmIT"mn around encouraging consumer participation holding 

on quality outcomes versus compliance requirements, encouraging managed 

care approaches and allowing states to use flexible funding mechanisms. 
12 


85441.002

morning members of the Committee. My name 5eem3 

policy and in this have been 

and state Departments of Health and Insurance. 

South Carolina, Nebraska, and 

Daniels's Healthy Indiana Plan, the nation's first 

beneficiaries. 

Designed in 1965 our VUIn(?I'aOIl2 n,nn, ""rtm1< the 

modern health care 

intractable program not foster PTrICIF'nc'v. 

these issues is more pronounced as states are entrenched 

Reluctance expand is not indifference to the 

the President 

state Medicaid programs, 

health Medicaid 

kept with 

Medicaid 

ofthe uninsured, but tr€'DI(13tlon 

an 

the fiscal sustainability of the program knowledge expanding reform serious 

consequences Medicaid's core mission 

of State budgets, and 

growth, nOflu,letion rjpmrl!"enlok<. 

require expensive long care. 

requirements. The 

All"ondai)ie Care 

om1!iI;,tir,n will 

and implementation hospital presumptive eligibility, Modified Adjusted Gross Income 

eliminates asset tests for the non-disabled, and the will states 
13 


85441.003

to $14.9 Additionally, there is prollision burden 

unprecedented requirement to 

Despite growing outlays does 

survey of only 

45 states or reduced provider reimbursement 

providers; on average 

providers lose money seeing Medicaid patients. 

appointments, face longer wait times, 

challenges will more pronounced 

insured Studies 

imnrclvements in decrease emergency room 

states have 

In 

to 

access 

hospital dum!:",,)m i, 

n~rHrin'<nt' have higher ER rates other insured population,s. 

Medicaid's is flawed structure. 

is jointly managed. States are 

to make routine changes. NClt\ru'itn,st,mrl 

for state inniO\!,ilti.,n. However, the approval 

promising ideas 

positive nllrrnm.'< new has the 

funded, governments, it 

permission processes 

a 

and there 

one state to a nother. Even 

Page 
14 


85441.004

Despite intense federal oversight, results 

For 

versus $24,761 

<lll'<f~n1Ci""V and there 

of day to day administrative processes, the federal and 

and incentives. States should 

goals successful states 

Medicaid's uncompromising policies 

isemc,oVJerHlUIVHJU,,1> from taking resDo;nsllbilitv 

cost and foster dependency. 

populations, an era of expansion to non-disabled adults, 

policies consider value based benefit design 

Indiana's 

consumerism with remarkable results; ,naoDI'oonate ER and 

Congress should assure fiscal su,;talnaljlli!tv 

without 

cost-sharing 

and 

of 

prevention. 

access quality services 

that the health enrollees. shift In management Is 

program should be reenglneered compliance that do not change 

incentives states, providers recipients outcomes, States are best 

policies that reflect the local values of the people they serve should given 

the do so. 

Page 4 
15 


85441.005

"SSO(:lm,on & National I<s';oc,a"oo 

States. Retrieved 

ii Deloitte, 

Milliman. 

Plans. 

IV Decker, $, 

for State 

I'OIJn("3HDn. Medicaid-ta-Medicare Fee 

The Oregon EX!)erim,eo! Effects 

online: 

Fiscal 

Medicaid Patients, 

with 

on 

Page 
16 


85441.006

x Based on 

Page 
17 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

Dr. Thompson 5 minutes for an opening statement. 

STATEMENT OF JOSEPH THOMPSON 

Dr. THOMPSON. Thank you, Mr. Chairman, members of the committee. I am Joe Thompson. I am a pediatrician and member of the 

faculty of the University of Arkansas for Medical Sciences. I direct 

the Arkansas Center for Health Improvement and have served as 

the lead candidate level advisor of surgeon general, first under Republican Governor Mike Huckabee and now under Democratic Governor Mike Beebe. I had the opportunity to work with two Administrations in the federal government. 

Our entire health care system has changed dramatically over the 

last five decades since the inception of Medicaid with increased 

therapeutic and diagnostic opportunities, increased treatments. 

The costs have grown, and with that have grown the cost on both 

the public and the private sector. Our private-sector costs in Arkansas have doubled over the last decade from $6,000 to 12,000 for 

a family of four’s premium. The costs have also increased for Medicare and Medicaid. As you have discussed, I want to commend this 

committee. The Medicaid partnership in funding for States and federal government is under intense duress and significant tension. 

But I would like to back up. It is not just a Medicaid problem. 

Our entire health care system is under a cost threat that threatens 

our families, our communities, and indeed, the economic vitality of 

our Nation. It is not a new issue, it has been growing, but suddenly 

we are forced to face it, and if I can, we started off with private 

insurance, largely through employers, and Medicaid for the vulnerable, the poor and the disabled. I will leave Medicare off because 

that is not the topic of your discussion. Over time as we grew the 

therapeutic and diagnostic opportunities, we grew the ability to do 

things to and for people, and the costs grew and the valley of the 

uninsured, people who could not afford care, grew also, so we started having more and more uninsured individuals. Private costs went 

up but the private employers or affluent families could continue to 

afford those costs. The Medicaid program did not keep pace with 

those costs, and neither federal government nor State government 

budgets could afford it, and so we ended up with a huge, large valley of the uninsured. We ended up with expensive private insurance that some can afford, and we have Medicare programs that 

cannot afford either on the federal or State budget, so we end up 

with what is a problem of the iron triangle: cost, access and quality. If we are not willing to pay, we are going to have access problems. If we have access problems, we suddenly have quality problems. This is not a single issue about Medicaid. This is a systemic 

issue about our failure to gain control of rapidly rising health care 

costs that have outpaced federal and State budgets, that only a few 

employers and families are able to continue to afford and that have 

grown the valley of the uninsured. 

So with that backdrop, let me share with you our experience in 

the State over the last 10 years. As of last year, we were operating 

nine different waiver programs designed by the State and approved 

by the federal government to provide Arkansans with better access, 

higher quality and more cost-effective care. Under the past AdminVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
18 

istration, President Bush’s Secretary successfully supported our 

proposal to develop a waiver for support of small businesses for 

businesses with fewer than 10 employees who virtually had no option for private employer-based health insurance coverage. This 

small business was titled the AR Health Networks Program. It was 

a low-cost, limited-benefit program, largely successful at maximum 

uptake. It will be absorbed into the Affordable Care Act now for 

small business support going forward, but we started that in 2005, 

eight years before the implementation of the Affordable Care Act 

will go into place. 

Four years ago, we started to tackle the issue of cost containment. Our Governor, our private sector recognized that the costs in 

the fee-for-service system were largely the cause for outpacing the 

growth potential of our revenue streams. So we understood a payment improvement initiative led by Medicaid which changed from 

a fee-for-service service to an outcomes-based incentives system 

with upside and downside risk for providers based upon what the 

outcome of the patients were so there would be engagement with 

patients. This required federal government approval, which we got 

through a State plan amendment within 2 months. It was an 

achievable goal because it was a programmatic need. 

More recently, our Republican legislature and the general assembly with the Governor’s support authorized use of the Affordable 

Care Act Medicaid programmatic funds to offer a totally new premium assistance program to buy health insurance premiums 

through the health insurance exchange, not to expand the Medicaid 

program in the traditional way, essentially to fill that valley in 

with private insurance, not to expand a State-run Medicaid program fraught with some of the issues that Ms. Verma alluded to. 

We will need to get a streamlined waiver from the Administration 

this summer. We have already started on that, and we have not 

identified a barrier to being able to do that at this point. So moving 

forward, we anticipate that of our 25 percent of the uninsured, we 

may have as many as a quarter million or almost 8 percent of our 

population not be in the Medicaid program but be in the private 

health insurance program. 

In conclusion, our State is not alone, other States need help, but 

it is a partnership based upon a long-term history that must be 

brought into the 21st century, not abandoned because we didn’t 

bring it into the 21st century. Thank you. 

[The prepared statement of Dr. Thompson follows:] 

19 


85441.007

Medicaid and Health System Transformation in Arkansas 

Statement of Joseph W. Thompson, MD, MPH 

Surgeon General for the State of Arkansas 

Director, Arkansas Center for Health Improvement 

Before the U.S. House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Health 

"The Need for Medicaid Reform: A State Perspective" 

June 12,2013 

1401 West Capitol Avenue. Suite 300, Victory Building. Little Rock, Arkansas 72201 
20 


85441.008

JoN Thompson, Testimony to U.5- House of Representatives, CommIttee on Energy and Commerce, SubcommIttee on Health, 6f12f13 

Medicaid and Health System Transformation in Arkansas 

Summary 

Federal programs, such as Medicaid, are essential in helping our most vulnerable citizens 

receive essential health care. Dramatic changes in our nation's health care system-rising costs, 

expanding need for government assistance, and increasing numbers of low-income uninsuredhave put tremendous strains on not only the federal-state partnership through Medicaid, but also 

on Medicare and private insurance programs. The systems, as they are currently designed, are 

not sustainable. Thus, it is essential that the federal government work as a partner with the states 

to transform the health care system of our nation. 

Arkansas has begun a major transformation of its health care system, implementing 

episode-based bundled payments in lieu offee-for-service standards, in an effort to align 

payment incentives with improved health care quality, better outcomes, and lower or contained 

costs. This transfonnation is made possible by Centers for Medicaid and Medicare Services' 

(CMS) approval of Arkansas's state Medicaid plan. Further, Arkansas's General Assembly 

recently passed a state law to create a "private option" that will enable expansion of private 

health care coverage to low-income (under 139 percent of the federal poverty level) through 

Medicaid-supported premium assistance. 

State-plan amendments and Medicaid program waivers are essential tools available to the 

federal government and to states that can be used to accomplish broad health care system 

transformation. Only through innovative transformations such as those being deployed in 

Arkansas will our system once again become viable and be able to provide efficient, accountable, 

and responsive delivery of health care to our citizens. 

Medicaid and Health System Transformation in Arkansas Page 2 016 
21 


85441.009

JWThompsoo, TestImony to U$. House of Representatives, Committee on Energy and Commerce, Subcommittee on Health. 6/12/13 

Importance of Medicaid in our Nation's Changing Health Care System 

Since their inception in 1965, Medicaid and Medicare have provided critical support for 

individuals to receive life-saving health care and manage life-altering diseases. For nearly five 

decades Medicaid-as a partnership between the federal and state governments-has been the 

primary and often the only source of health care coverage for the poorest, sickest, and most 

disabled Americans. Many of these citizens are those most in need of coverage, having multiple 

and complex health conditions but lacking the financial resources to secure private-market health 

insurance. The comprehensive scope of services and limited cost-sharing design was intended to 

address the complex health needs oflow-income populations, including the chronically ill and 

individuals with severe physical and mental disabilities. 

Over these five decades, the U.S. health care system has changed dramatically. Along 

with increased diagnostic and therapeutic options, we have an expanded ability to extend life, 

resulting in increased costs of care. Life expectancy has increased by nearly 10 years since the 

1960s. At the same time, health care costs now represent 17 percent of the gross domestic 

product and place the nation and our economic competitiveness at risk. Private health insurance 

costs, Medicare costs, and Medicaid costs have consistently outpaced economic growth by every 

indicator. In Arkansas, private premiums for family coverage have nearly doubled from -$6000 

to -$12,000 in the past decade. Similar inflationary increases have been felt in Medicaid 

programs across the country, exacerbated by the economic downturn that has increased the 

number of individuals relying on the program for basic health care services. 

Thus, the Medicaid program is one major component of a health care system entering a 

necessary transition--one that achieves accessible, high-quality care at a cost that is sustainable. 

This challenge is in no way limited to Medicaid. Private insurance, Medicare, and self-insured 

employers are each faced with similar challenges. However, the shared financial obligation 

Medicaid and Health System Transformation in Arkansas Page 30f6 
22 


85441.010

JW Thompson, Testimony to U.S. House of Representatives, Committee on Energy and Commerce, Subcommittee on Health, 6/12113 

between the federal government and states is unique to Medicaid and too frequently places 

tension on the partnership relationship that must be productive to be successful. This tension 

should result in reinforcing support for change, not evisceration of the federal government's 

responsibility to achieve that change. 

Health System Transformation in Arkansas 

Arkansas Payment Improvement Initiative 

Arkansas has tackled the challenge of system reform and demonstrated the ability to have 

Medicaid lead a creative new strategy for health care system transformation by utilizing tools 

that are available today. Starting three years ago, the Arkansas Payment Improvement Initiative, 

led by Medicaid, began to establish a multi-payer effort to realign payment incentives to improve 

quality, achieve better outcomes, and contain costs. This initiative created a transition from a feefor-service system to an incented episode-based model with both upside and downside risk on 

providers, with incentives paid through the Medicaid program. Accomplishing this required both 

state legislative and federal Centers for Medicaid and Medicare Services (CMS) approval. Using 

the state-plan amendment process, Arkansas gained federal approval within two months of 

submitting its plan. In large part, this approval was due to the demonstrated benefit and 

safeguards for the patient, the alignment of payment incentives for outcomes, and the potential to 

improve the system of care. As we extend this initiative by implementing new bundled episodes 

of care for various health conditions, we anticipate generating shared savings-savings for 

providers and savings to the state and federal governments. 

Private Option in Arkansas 

Most recently, the Arkansas General Assembly authorized the use of Medicaid funding 

through the Patient Protection and Affordable Care Act (PPACA) to provide premium assistance 

Medicaid and Health System Transformation in Arkansas Page 4 016 
23 


85441.011

JW Thompson, TestImony to U.S. House of Representatives, Committee on Energy and Commefce, Subcommittee on Health, 6f12f13 

to individuals under 139 percent ofFPL for the purchase of private insurance qualified health 

plans (QHPs) via the new marketplace, or the Arkansas Health Connector. 

Nationwide, Medicaid has historically used three mechanisms to finance and deliver 

health care for eligible individuals--direct provider payments (primary method used by 

Arkansas), competitive contracts directly with Medicaid managed care companies, or premium 

assistance through employers (limited to select cases where employer coverage was more cost 

effective). Arkansas's new approach is essentially premium assistance through the newly 

established marketplaces, achieving equivalent access for Medicaid beneficiaries and the 

privately insured while also incorporating private-sector cost-containment mechanisms. The 

explicit intent of the Republican leadership in our state legislature is to transform Medicaid and 

the Arkansas health care system into a more efficient, accountable, and responsive delivery 

system. Secretary Sebelius and CMS are working closely together to achieve successful 

implementation through necessary state plan amendments and/or waivers under her authority. 

Role of Waivers in Transforming Health Care 

As of2012, Arkansas Medicaid was operating nine waiver programs designed by the 

state and approved by the federal government to provide Arkansans with better access, higher 

quality, and more cost-effective care. Among these is the ARHealthNetworks program, which is 

a low-cost, limited, health-care benefit program aimed at providing financial access to workingage adults and designed specifically for small businesses and self-employed individuals without 

medical coverage. 

Arkansas is not alone among states in either seeking or obtaining flexibility through 

waivers to innovate and provide better value through Medicaid. Nearly every state in the union 

operates a waiver program. Currently 381 active waivers provide states with flexibility, enable 

the provision of services through managed care delivery systems, test new financing and delivery 

Medicaid and Health System Transformation in Arkansas Page 50f6 
24 


85441.012

JW Thompson, Testimony to U.5 House of Representatives, Comm~ttee on Energy and Commerce, Subcommittee on Health, 6f12f13 

models, or modifY administrative processes and improve program integrity. While still 

recognizing the need for accountability for significant federal expenditures via waivers, CMS is 

working to streamline the waiver application process and to provide greater flexibility in light of 

the creativity of states and the rapidly changing marketplace. In addition, the new Center for 

Medicaid & Medicare Innovation has established more than 40 models for system transformation 

available to providers, communities. and states. These innovations are beginning to gain traction 

under the current partnership model where the risk of innovation is shared by the federal and 

state governments. 

A call for block grants or "capped" exposure by the federal government to states is 

frequently cloaked in the justification of needed state flexibility but stems from a desire to limit 

federal fiscal exposure to the Medicaid program, with the possibility of curbing the very 

innovation that needs to be encouraged. 

Conclusion 

Accelerated change is needed in the Medicaid program but more importantly in the health 

care system itself. Medicaid, as a substantial purchaser of health care services that shares risks 

with states, is in a position to lead. 

Tools exist now to achieve federal support of states when the approach to changing 

Medicaid includes recognition of the needs oflow-income and disabled beneficiaries; the 

changes are part of a long-term state strategy to improve quality outcomes and costs; and the 

proposed changes offer an advance to the system. Now is not the time to weaken the federal-state 

partnership within Medicaid. It is the time to aJign federal and state commitments to achieve a 

high-quality health care system for all, inclusive of those who are most vulnerable. 

Medicaid and Health System Translomnation in Arkansas Page 6 016 
25 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. Keck 5 minutes for an opening statement. 

STATEMENT OF ANTHONY E. KECK 

Mr. KECK. Good morning, Mr. Chairman and members of the 

subcommittee. My name is Anthony Keck. I am the South Carolina 

Director of Health and Human Services, the State Medicaid agency. I appreciate the invitation to discuss my thoughts on improving 

health through Medicaid. 

While we don’t run a $6 billion agency on anecdote, I would like 

to share a simple story with you that sums up our common challenge. I once ran a community clinic in a poor but vibrant and politically active New Orleans neighborhood known as the St. Thomas/Irish Channel. During that time, I took part in a focus group of 

pregnant teenage girls enrolled in Medicaid who were participants 

in a separate citywide program that matched each girl with a 

doula—a birthing coach—to help her better connect to the health 

care system and prepare for motherhood. One conversation still 

stands out. Paraphrasing her almost 20 years later, one of the participants said with exasperation near the end of our time together 

‘‘Look, I love my doula and my doctor and I appreciate all the help 

they give me, but I’ve slept on a different couch almost every night 

for the past 3 weeks, and that’s why I’m having a really hard 

time.’’ 

The limits of our programs, expressed in the statement of that 

teenager, are clear. She needed stable housing; what we had were 

doulas. She probably needed both. Her personal struggle captures 

the truth that years of public health research on social determinants of health has revealed: the primary drivers of health and 

well-being are income, education, community and family support, 

personal choices, environment, race, and genetics, while health care 

services contribute to a much lesser extent. 

Yet our health system is built on the tenuous logic model that 

health insurance leads to access to effective health care services, 

which then leads to health. We are so beholden to this common 

wisdom that even though the Institute of Medicine estimates up to 

30 percent of all health care spending is excess cost, we now spend 

almost 18 percent of our paycheck, payrolls and government budget 

on health care services while we fall further and further behind on 

health status compared to the rest of the world. 

David Kindig, one of the country’s leading public health researchers, recently wrote that for all of our health spending, mortality increased for women in 43 percent of U.S. counties between 1992 and 

2006 with no correlation to medical care factors such as health insurance status or primary care capacity. He calls for a robust strategy to address this appalling trend, and I quote, ‘‘Such a strategy 

would include redirecting savings from reductions in health care inefficiency and increasing the health-promoting impact of policies in 

other sectors such as housing and education.’’ He goes on to say 

that ‘‘Each county, not each State, each county needs to examine 

its outcomes and determinants of health to determine what crosssectoral policies would address its own situation most effectively 

and quickly.’’ 

26 

Yet Medicaid today operates under the default position that different populations and geographies face similar challenges and equity in health insurance benefits is the goal of the program rather 

than improvement in population health. Medicaid currently treats 

States more like subcontractors operating at a discount than partners contributing over 40 percent of the bill. Deviations from the 

norm require State plan amendments and special waivers. This 

may give the illusion of accountability, but promotes neither quick 

or effective local solutions nor cross-sectoral solutions, which consider public health, education, housing, employment, food security, 

personal responsibility and community action as important contributors to achieving better health and well-being for individuals and 

communities. 

The truth is there are few, if any, long-term population health 

goals currently negotiated between States and the federal government so it is no wonder that we cannot agree on Medicaid’s value. 

In addition, for all the federal efforts to manage expenditures 

through maintenance of effort requirements, limiting state revenue 

maximizing strategies, and focusing on fraud and abuse, the program continues to grow while access to health services suffers. 

I believe there is a developing bipartisan interest among States 

for flexibility to manage programs locally in exchange for more accountability for improved health and more predictability in expenditures at the State and federal level. I ask you to consider the proposals both before you and in development that would accomplish 

this goal. Thank you. 

[The prepared statement of Mr. Keck follows:] 

27 


85441.013

Anthony Keck, Director, South Carolina Health and Human Services 

Summary of Testimony to the Subcommittee on Health, Committee on Energy and Commerce 

Wednesday, June 12, 2013 

The Institute of Medicine estimates up to 30 percent of health care spending is waste while we fall further 

behind on health status compared to the rest of the world. 

Years of public health research concludes the primary drivers of health and well-being are income, 

education, community and family support, personal choices, environment, race, and genetics. Health care 

services contribute to a much lesser extent. 

Despite this evidence, our health system is built on the tenuous logic model that health insurance leads to 

access to effective health care services, which leads to health. Health care spending crowds out other 

important personal, business, and government spending. 

We need to pursue strategies that according to David Kindig, et al. "include redirecting savings from 

reductions in health care inefficiency and increasing the health promoting impact of policies in other sectors 

such as housing and education," and promote local examination of "outcomes and determinants of health 

to determine what cross-sectoral policies would address its own situation most effectively and quickly." 

Medicaid currently treats states more like sub-contractors operating at a discount than partners 

contributing over 40 percent of the bill. Deviations from the norm require state plan amendments and 

speCial waivers, which may give the illusion of accountability, but promote neither quick and effective local 

solutions nor cross-sectoral solutions. 

Currently there are few, if any, long-term population health goals negotiated between states and the federal 

government. Despite federal efforts to manage expenditures through maintenance of effort requirements, 

limiting state revenue maximizing strategies, and focusing on fraud and abuse, Medicaid spending grows as 

access to health services suffers. 

There is developing interest among states for flexibility to manage programs locally in exchange for more 

accountability for improved health and more predictability in expenditures at the state and federal level. 

1 
28 


85441.014

Anthony Keck, Director, South Carolina Health and Human Services 

Testimony to the Subcommittee on Health, Committee on Energy and Commerce 

Wednesday, June 12, 2013 

Good morning Mr. Chairman and members of the subcommittee. My name is Anthony 

Keck, and I am the South Carolina Director of Health and Human Services, the state 

Medicaid agency. I appreciate the invitation to discuss my thoughts on improving health 

through Medicaid. 

While we don't run a $6 billion agency on anecdote, I'd like share a simple story with 

you that sums up our challenge. 

I once ran a community clinic in a poor but vibrant and politically active New Orleans 

neighborhood known as the St. Thomas/Irish Channel. During that time, I took part in a 

focus group of pregnant teenage girls enrolled in Medicaid who were participants in a 

separate citywide program that matched each girl with a doula - a birthing coach - to 

help her better connect to the health care system and prepare for motherhood. 

One conversation still stands out. Paraphrasing her almost 20 years later, one of the 

participants said with exasperation near the end of our time together "Look, I love my 

doula and my doctor and I appreciate all the help they give me, but I've slept on a 

different couch almost every night for the past three weeks, and that's why I'm really 

having a hard time." 

1 
29 


85441.015

The limits of our programs, expressed in the statement of that teenager, are clear. She 

needed stable housing, what we had were doulas. Her personal struggle captures the 

truth that years of public health research on social determinants of health has revealed: 

the primary drivers of health and well-being are income, education, community and 

family support, personal choices, environment, race, and genetics, while health care 

services contribute to a much lesser extent.; 

Yet our health system is built on the tenuous logic model that health insurance leads to 

access to effective health care services, which leads to health. We are so beholden to 

this common wisdom that even though the Institute of Medicine estimates up to 30 

percent of all health care spending is waste ii, we now spend almost 18 percent of our 

paycheck, payrolls, and government budget on health care servicesiii while we fall 

further and further behind on health status compared to the rest of the world.iv 

David Kindig, one of the country's leading public health researchers, recently wrote that 

for all of our health spending, mortality increased for women in 43 percent of US 

counties between 1992 and 2006 - with no correlation to medical care factors such as 

health insurance status or primary care capacity. He calls for a robust strategy to 

address this appalling trend: 

2 
30 


85441.016

"Such a strategy would include redirecting savings from reductions in health care 

inefficiency and increasing the health promoting impact of policies in other 

sectors such as housing and education." 

He goes on to say that: 

"Each county ... needs to examine its outcomes and determinants of health to 

determine what cross-sectoral policies would address its own situation most 

effectively and quickly."v 

Yet Medicaid today operates under the default position that different populations and 

geographies face similar challenges and equity in health insurance benefits is the goal of 

the program rather than improvement in population health. Medicaid currently treats 

states more like sub-contractors operating at a discount than partners contributing over 

40 percent of the bill. Deviations from the norm require state plan amendments and 

special waivers, which may give the illusion of accountability, but promote neither quick 

nor effective local solutions nor cross-sectoral solutions, which consider public health, 

education, housing, employment, food security, personal responsibility, and community 

action as important contributors to achieving better health and well-being. 

The truth is there are few, if any, long-term population health goals currently negotiated 

between states and the federal government so it is no wonder that we cannot agree on 

3 
31 


85441.017

Medicaid's value. In addition, for all the federal efforts to manage expenditures through 

maintenance of effort requirements, limiting state revenue maximizing strategies, and 

focusing on fraud and abuse, the program continues to grow while access to health 

services suffers. 

I believe there is a developing bi-partisan interest among states for flexibility to manage 

programs locally in exchange for more accountability for improved health and more 

predictability in expenditures at the state and federal level. I ask you to consider the 

proposals both before you and in development that would accomplish this goal. 

i Centers for Disease Control and Prevention. Social Determinants: Frequently Asked 

Questions. Retrieved online: http://www.cdc.gov/socialdeterminants/FAQ.html 

ii Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving 

Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. 

iii Center for Medicare and Medicaid Services. National Health Expenditure Projections 

2011-2020. Retrieved online: http://www.cms.gov /Research-Statistics-Data-andSystems/Statistics-Trends-andReports/NationaIHealthExpendData/Downloads/Proj2011PDF.pdf 

iv National Research Council. (2011). Explaining Divergent Levels of Longevity in HighIncome Countries. E.M. Crimmins, S.H. Preston, and B. Cohen, Eds. Panel on 

Understanding Divergent Trends in Longevity in High-Income Countries. Committee on 

4 
32 


85441.018

Population, Division of Behavioral and Social Sciences and Education. Washington, DC: 

The National Academies Press. 

v Kindig, David, A., Cheng, Erika, R. (2013). Even As Mortality Fell In Most US Counties, 

Female Mortality Nonetheless Rose In 42.8 Percent Of Counties From 1992 To 2006. 

Health Affairs. March 2013 32:3451-458. 

5 
33 

Mr. PITTS. The chair thanks the gentleman. I will begin the 

questioning and recognize myself 5 minutes for that purpose. 

First, if you listen to many, you would think that all it took for 

our most vulnerable to be healthy was a Medicaid card. Yet as Ms. 

Verma notes in her testimony, despite more spending, a Medicaid 

card does not guarantee access or quality of care. We know how difficult it is for States to customize care in a way that makes sense 

for each enrollee not under a one-size-fits-all approach, and I believe the best way to improve the care of the 72 million Americans 

on Medicaid is through local action on the ground in a way that 

empowers States to work with stakeholders, providers and patients. 

Ms. Verma, States often ask the federal government to cut the 

useless red tape that strangles innovation. Would you be specific? 

What specific bureaucrat hurdles are at the top of your wish list 

that you would like to see removed for States in an effort to improve care and reduce cost? 

Ms. VERMA. Thank you for the question. I think first of all, there 

has got to be some sort of a triage process if there are routine 

changes, changes in rates, changes in benefits, so these are routine 

changes, that some changes shouldn’t require permission from the 

federal government, and I think we need to understand or to define 

what requires permission and what requires just informing the federal government that the State is making a change. So that would 

be the first one. I think the other piece in terms of especially 

around innovation and around waivers is to have some very defined criteria about how these waivers and State plan amendments 

are going to be evaluated, what the timelines are. I think it is very 

important for a State for planning purposes to be able to know if 

they submit a waiver, you know, when they can expect to receive 

a response from the federal government, and also how that is going 

to be evaluated. I think reciprocity is also important, and I think 

if a waiver has been granted to one State or a State plan amendment in one State, that that should be applied to another State and 

that would also reduce some of the timelines there. 

Mr. PITTS. Mr. Keck, do you want to add to that list? Specific bureaucrat hurdles. 

Mr. KECK. Yes. First, I want to echo exactly what Seema said, 

that reciprocity is important. We spent a lot of our time trying to 

figure out what other States have negotiated with their regional office or with the federal office, and many times we know that our 

State has been denied. I think deadlines are important. We run on 

a State fiscal year, and when I need to respond to my legislature’s 

budgeting process and their requirements to implement policies I 

cannot do that very effectively when we operate on such long 

timelines with the federal government. I have a waiver issue that 

is being resolved right now that has taken 5 years to work through 

the system, and it involves $3 million worth of federal money but 

it has taken years to negotiate and hundreds, if not thousands, of 

hours of staff time. 

And then finally, template changes. I believe there are a series 

of routine changes related to rates, related to quality measures and 

so on, that States are fully capable of making on their own. It is 

actually rare that they get denied but we spend many, many 

34 

months and many, many man-hour responding to questions and so 

on, and again, being on a State fiscal year where we have to get 

changes implemented on a timely basis, it adds significant problems in our operations. 

Mr. PITTS. If you will continue, Mr. Keck, many private employers and insurers have successfully lowered health care costs and 

improved patient outcomes through value-based insurance design— 

VBID. States have often asked for greater flexibility to offer VBID 

plans to Medicaid enrollments. What is South Carolina doing to ensure patients can achieve better health outcomes? 

Mr. KECK. We are strong believers in the VBID concept, and actually we are the first State to work with the University of Michigan Value Based Insurance Design Institute on implementing a 

VBID program in Medicaid. When we first met the folks that run 

this program, it was a Mill Bank conference and they were talking 

about the possibilities for VBID to work in State employee benefit 

programs. And along with one of my State senators, I raised my 

hand and said well, what about Medicaid because Medicaid is one 

of the most important payers in the country, if not the most important, and they said well, we don’t do anything with Medicaid because the restrictions are so strong and Medicaid folks don’t contribute to their premiums and they generally don’t’ have copays 

that are enforceable so we just ignored it, and we pushed them 

during that 2 days and said you can’t just ignore it, we have to be 

able to build these concepts into Medicaid. The problem is, they are 

generally one-sided. When you talk to VBID folks, it is a set of carrots and sticks, and they have different effectiveness in different 

situations but unfortunately, generally in Medicaid, it is all carrots, 

and sometimes you need sticks, but right now we are generally stymied. There has been some recent flexibility that has been granted 

by the federal government related to copays but we are still convinced we need to go much further, and so in the next several 

months we will be approaching CMS with some of our ideas out of 

the VBID concepts. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the ranking member 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. I wanted to ask some 

questions of Dr. Thompson. 

You and I both have a number of concerns about some of the proposals to convert Medicaid to a block grant program or a system 

of per capita caps while a block grant or per capita cap would save 

federal dollars by cutting payments to States caring for vulnerable 

families. Those dollars would be saved on the backs of the most 

vulnerable members of our communities. In addition to the very 

real risk of beneficiaries being subjected to reduced health care coverage and increasing personal health care costs, you also commented in your testimony that both of these proposals are likely to 

curb innovation. So could you explain what you mean when you say 

that these proposals will curb innovation and also share your 

thoughts more broadly about the potential impact of these proposals? 

Dr. THOMPSON. Thank you, Mr. Co-Chair. Our health care system is incredibly complex, and I think what we see in short-term 

fixes are essentially what has been around for a long time. It is an 

35 

easy fix, which rarely works in a complex situation. We have found 

that when we bring to the Administration, and it has not mattered 

which Administration, an approach that is inclusive of the needs 

of the low-income and vulnerable population that is part of the 

long-term State strategy and that moves the system forward, we 

have been able to work through the regulatory challenges that are 

there. It is not always with the speed, and I think there are some 

comments by Ms. Verma and Mr. Keck that could be incorporated, 

are being incorporated by this Administration on streamlined waivers. But I think if we don’t take the root problem that our payment 

system is causing us to have a growth in health care that does not 

equal value or outcomes, then we are not going to have a quick fix 

that increased flexibility. We will squeeze the balloon in one place 

and it will open up in another place, probably on State budgets or 

at the expense of the vulnerable and poorest of our citizens. 

Mr. PALLONE. Now, in the end, won’t capping federal support for 

the program merely shift costs elsewhere on private businesses, patients and providers as well as State governments? I mean, you 

sort of suggested that but if you could just answer. 

Dr. THOMPSON. This is what led our Republican leadership in 

part to take advantage of the Affordable Care Act. We have 25 percent of our Arkansas 19- to 64-year-olds that are uninsured. We 

have 40 percent, approaching 40 percent in some counties. Those 

individuals are not well. Fifty percent of our population has a 

chronic condition. They are seeking care. They are using the emergency room in an inefficient way. And so by taking advantage of 

the Affordable Care Act but, importantly, tying it to our payment 

reforms and putting it in the private sector with the new cost sharing and copayments, which we intend to push on and expand, we 

hope that we can actually design a new and sustainable health 

care system inclusive of Medicaid and one that rewards providers 

for the care that they give and achieves equal high-quality care for 

all regardless of income. 

Mr. PALLONE. Thank you. Can I ask you, what was your experience as far as the flexibility, responsiveness, timeliness of CMS, 

you know, the Centers for Medicare and Medicaid Services, when 

you applied for the State plan amendment for this? 

Dr. THOMPSON. Our State plan amendment went through in 

roughly less than 2 months, and this was from our inception to our 

successful achievement. It was like Mr. Keck mentioned, important 

to be timely because we were concurrently running rules and regulations in our general assembly, so we had to get both general assembly through rule and regulation and federal government support, and I think it is important for the feds and for the local general assemblies to recognize those are often in concert, not totally 

separate issues. But we successfully got approval to have upside 

and downside risk on our providers within 2 weeks of request from 

the Centers for Medicare and Medicaid Services. 

Mr. PALLONE. All right. Thank you very much. I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the vice chair of the committee, Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. I will try to make good 

use of Mr. Pallone’s time that he yielded to me. 

36 

Mr. Keck, I have got to ask you, for the good of the committee 

and our general knowledge, spend just 2 seconds and tell the committee what a doula is. 

Mr. KECK. A doula is essentially a birthing coach that is of the 

committee that generally she but sometimes he works in to 

help—— 

Mr. BURGESS. Not a medical person? 

Mr. KECK. Not a medical person. 

Mr. BURGESS. So not a midwife? 

Mr. KECK. That is right. 

Mr. BURGESS. Basically someone who daubs a forehead and says 

it will be all right. Is that correct? 

Mr. KECK. Well, and also helps a woman connect with the health 

care system that is sometimes very difficult. 

Mr. BURGESS. So is it correct to think of a doula as sort of a navigator or a precursor to a navigator? 

Mr. KECK. I would consider them a community health worker but 

to help navigate the health system because it is so complex. 

Mr. BURGESS. And no disagreement there. And in fact, so good 

to have all of you all at this hearing. I cannot tell you the number 

of times we had hearings in 2007 and 2008 where you wondered 

where Mitch Daniels was when we were having all the discussions 

how to provide more for less, and you correctly identified Governor 

Daniels as being a leader in this issue, and he found that something magic happens when people spend their own money for 

health care, even if it wasn’t their own money in the first place. 

Would that be a correct observation of the Healthy Indiana program? 

Ms. VERMA. Yes, that is correct. I mean, within the Healthy Indiana Plan, participants are required to make contributions into an 

account. The State also funds that account, and then they use 

those dollars to cover their first $1,100 of health care services, and 

if they complete their preventive health care, then at the end of the 

year whatever money is left in that account rolls over and it decreases the amount that the person would have to pay in the subsequent years. And so we have had great results, lower emergency 

room, higher generic use. 

Mr. BURGESS. And this is the Medicaid population, not the State 

employee population that also was written about in the Wall Street 

Journal. Is that correct? 

Ms. VERMA. That is correct. 

Mr. BURGESS. And what kind of savings did you achieve in the 

Medicaid program with Healthy Indiana? 

Ms. VERMA. I think what we have seen in the Healthy Indiana 

program in terms of savings is a real shift in patient behavior. We 

have seen patients—— 

Mr. BURGESS. May I interrupt you there for a moment because 

that is the important point, and the Commonwealth Fund, I don’t 

generally agree with everything they talk about, but a few months 

ago they talked about the concept of an activated patient being one 

where health care expenditures were reduced, and essentially that 

is what you found, isn’t it? 

Ms. VERMA. That is correct. I mean, I think that so many of the 

policy changes or regulations are aimed at providers, they are 

37 

aimed at insurance companies, pharmaceutical companies, but we 

sort of miss the point that the individual has a very significant role 

to play in controlling health care costs, and that is not just for commercial populations but even the low-income population. They are 

perhaps the best consumers of a dollar. They have had experience 

stretching a dollar, and I think when you empower them that they 

start to make decisions about where to seek their health care, how 

to seek care in more appropriate ways and seeking more preventive 

care. 

Mr. BURGESS. Yes, I liked everything about your testimony except that you were way too nice, and you need to be a little harsher 

in your assessments than saying there is trepidation about the future fiscal sustainability. Governors are scared to death, and I 

could use another word there, but I will be nice, they are scared 

to death about what is going to happen by taking on this obligation. The federal government has proven itself to be an absolutely 

unreliable fiscal partner when it comes to health care. Ask any doctor out there who takes Medicare what has happened to their reimbursement. 

Let me just for a moment, you have identified something that is, 

I think, to Healthy Indiana, and that is the participation in the 

preventive programs. Is that a correct observation? 

Ms. VERMA. That is correct. 

Mr. BURGESS. And the reason that that is so important, of 

course, is, we will all talk about it here in glowing terms that an 

ounce of prevention is worth a pound of cure, and so we are basically paying for that ounce of prevention but we want to see the 

pound of cure. It is important because I am told by my staff that 

the total federal spending over the next 10 years, combined federal 

and State spending over the next 10 years for Medicaid is $7.5 trillion, $750 billion a month. I mean, that a phenomenal amount of 

money. If we could even bend the cost curve just a little bit with 

preventive care, that ounce of prevention, that is a hell of a pound 

of cure. 

Let me just ask you this. What is Indiana doing as far as Medicaid expansion is concerned? 

Ms. VERMA. Well, I would defer to the State of Indiana to answer 

that officially but I think in the comments that I have read, I think 

that Governor Pence has indicated that he wants to understand 

what the future of the HIP program is before he can make a determination about what his position will be on the Medicaid expansion. 

Mr. BURGESS. Thank you. Mr. Chairman, I just have to observe 

that I was there on the second day of the Supreme Court oral arguments, and the discussion from the Solicitor General was repeatedly, it is the cost of these free riders that are driving up our 

health care. No. We reimburse so poorly in Medicaid that the patients can only do what they have always done, which is go to the 

emergency room, the highest point of contact. If we expand the program, we are going to expand the problem. I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the distinguished ranking member of the full committee, the Ranking Member Emeritus, Mr. Dingell, 5 minutes for questions. 

38 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy and 

I thank you for holding this hearing. 

Medicaid is an important and timely topic, especially as we are 

about to greatly expand eligibility of the program as a part of the 

Affordable Care Act. Some of our colleagues here continue to ask 

for flexibility for the States to experiment with new and innovative 

methods of care. However, much flexibility already exists in the 

program, and many States are making significant changes using 

this. These questions are for Dr. Thompson, Surgeon General of the 

State of Arkansas. 

Doctor, I want to commend you for your helpful testimony. Doctor, did Arkansas recently implement the Arkansas Payment Improvement Initiative after receiving approval from the federal government? Yes or no. 

Dr. THOMPSON. Yes, sir. 

Mr. DINGELL. Doctor, how long did it take for Arkansas to get 

that approval? 

Dr. THOMPSON. We worked 3 years on the development within 

the State but the approval itself was relatively rapidly received in 

2 months. 

Mr. DINGELL. What does that mean? How relatively rapid? 

Dr. THOMPSON. Two months after our request. 

Mr. DINGELL. OK. Doctor, did this new initiative begin to transition away from the fee-for-service models towards a more valuebased payment model? Yes or no. 

Dr. THOMPSON. Yes, sir. 

Mr. DINGELL. And I happen to think, and will you confirm or 

deny this, that that is the direction we are going to have to go because one of the things about our system is it is broken because 

we are paying for work done and not for results achieved? 

Dr. THOMPSON. I believe we must align the financial incentives 

for the outcomes that we want, not for the services that are provided, and I think that is one of the fundamental issues that has 

yet to be resolved in our health care system. 

Mr. DINGELL. Thank you. Doctor, have the reforms implemented 

in Arkansas resulted in cost savings which can be quantified? Yes 

or no. 

Dr. THOMPSON. Through the first three quarters of the year since 

we implemented this, we have seen a dramatic reduction in growth 

in the Medicaid program. It is lower than it has been in the last 

25 years. 

Mr. DINGELL. Would you submit this for the record? I gather the 

answer to that is yes. 

Dr. THOMPSON. Yes. 

Mr. DINGELL. And would you please submit that for the record? 

Because I have got a lot of questions and very little time. 

Dr. THOMPSON. Yes, sir. 

Mr. DINGELL. Doctor, could you now please submit for the record 

a detailed explanation of the initial results following the implementation of this new Arkansas plan, please? 

Dr. THOMPSON. I would be glad to. 

Mr. DINGELL. Doctor, in your testimony you mentioned that 

nearly every State has a Medicaid waiver and that there are current 381 active waivers. Is that correct? 

39 

Dr. THOMPSON. To the best of my knowledge, yes, sir. 

Mr. DINGELL. It seems to me that the States currently have a 

viable existing pathway to get some flexibility under Medicaid. Do 

you agree with that statement? 

Dr. THOMPSON. I agree that they have that flexibility. 

Mr. DINGELL. Now, this leads me to questions of how many of 

the reforms proposed in a recent report issued by my good friend, 

Chairman Upton, and my other good friend, Senator Hatch, titled 

‘‘Making Medicaid Work.’’ This report proposes to eliminate the 

medical loss ratio provision in the Affordable Care Act, which gave 

the consumers over $1 billion in rebates in 2011. The report also 

suggests that we repeal the maintenance-of-efforts provision in 

ACA, which would allow the States to restrict eligibility for the 

program and would reduce access to care. Finally, instead of turning Medicaid into a block grant, as has been proposed in years 

past, this year the proposals are a per capita cap on Medicaid 

spending. Now, Doctor, would this new proposal still result in the 

loss of coverage and benefits for beneficiaries? Yes or no. 

Dr. THOMPSON. Well, sir, I think the report that you allude to 

has several recommendations that I would concur with. The three 

that you identified, I would agree have potential problems for the 

States. A per capita block grant to the States in the face of escalating health care costs that are not contained is a cost transfer to 

the State for future rate increases on health care. 

Mr. DINGELL. It should scare the hell of the States, shouldn’t it? 

Dr. THOMPSON. My advice to any governor for a block grant is 

watch out because you are getting a transfer of responsibility without control of future rate increases. We have to control the cost increases on health care before we can actually transfer fiscal responsibility or block off fiscal responsibility in the Medicaid partnership. 

Mr. DINGELL. Now, Doctor, do you believe that the per capita 

would actually cause innovation by the States or would it cause a 

disruptive nature which would place consumer protection of our 

most vulnerable citizens at risk? I gather you agree with that 

statement, yes? 

Dr. THOMPSON. I have concerns, and I think I share those with 

others, that caps of any kind without a long-term strategy to assure quality while maintaining cost is a risk to the beneficiary and 

it is a transfer of financial and responsibility risk to whoever is 

being capped. 

Mr. DINGELL. I am going to make a quick statement and ask 

this. I have the impression that our system is broken because we 

are paying for work done and not for accomplishments and for completion of assuring health for the people and that we are trying to 

figure a way to transfer from the current system to a system which 

recognizes the need to get results as opposed to just paying for 

work. 

Now, Dr. Verma and Dr. Thompson and Mr. Keck, do you agree 

with that statement? Yes or no. 

Mr. KECK. Yes. 

Mr. DINGELL. Yes? 

Ms. VERMA. Yes. 

40 

Mr. DINGELL. The reporter doesn’t have a nod key so you have 

to say yes or no. 

Ms. VERMA. Yes, I do. 

Mr. DINGELL. Have you all agreed with that? 

Dr. THOMPSON. I will be the third to agree, yes. 

Mr. DINGELL. Thank you. Mr. Chairman, I thank you for your 

courtesy to me. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Dr. Thompson, I want to follow up on Mr. Dingell’s, your little 

discussion there. You said how many waivers you asked for? Three 

hundred and eighty? 

Dr. THOMPSON. No, that is the total number that are active 

across the United States from the most recent information we had 

from the Centers for Medicare and Medicaid Services. 

Mr. SHIMKUS. And so you all have submitted—— 

Dr. THOMPSON. We have 12. 

Mr. SHIMKUS. You have 12. And were those 12 active waivers all 

adjudicated or decided in that 2-month window of approval? 

Dr. THOMPSON. No, some of those waivers took much longer. 

Some of the waivers, as Mr. Keck alluded to, in the past have 

taken years to get conclusion on. 

Mr. SHIMKUS. Go back through your timeline. Developing your 

program by the State of Arkansas took how long? 

Dr. THOMPSON. So specific to the payment improvement program, 

which is the most current experience that we have— our Medicaid 

expansion will be this summer’s experience—we started off with 

advice that Mr. Dingell alluded to. My advice to the Governor was 

that our fee-for-service system was broken 3 years ago. So we spent 

2 or 3 years working with both the public and private sector. We 

have Medicaid, we have Blue Cross, we have Qual Choice of Arkansas. We have had Walmart as a self-insured company join because 

of their interest in changing the way the health care system works. 

Last October, we had Medicare join in our patient-centered medical 

home effort. So we have been developing this over the last 3 years. 

This summer because we were changing the way that we were 

going to incentivize providers to engage with patients to increase 

the individual accountability of patients and also the outcomes 

availability of the providers, we needed to get a State plan amendment from the Centers for Medicare and Medicaid Services. We applied in, I can’t remember if it was June or July but within two 

months had approval from CMS to implement those changes, and 

we started aligning different incentives on providers in October. 

Mr. SHIMKUS. So if nationwide there is 380, on average sevenplus waivers applications per State in the process, my interest is, 

obviously I am from the State of Illinois. In my personal opinion, 

we have done a very poor job, and what the State did last year, 

$1.6 billion of cuts to Medicaid program and established a moratorium on expansion for 2015, even though then we increased enrollment by 15 percent, and by the beginning of 2013 the State had 

a funding gap of $3 billion. Just last week, the State received yet 

another credit rating downgrade. It is our second. This is all the 

cost of a burden of States of pension and Medicaid benefits. These 

41 

are real life stories so Illinois has now another credit downgrade, 

which means the cost of borrowing goes up. 

So if you were in the position of the State of Illinois, because we 

are going to expand its Medicaid under ObamaCare, bringing on 

new applicants to a system that is already spending $5 billion 

more, is already expanding our roles, what would you suggest the 

State of Illinois do? Let us go left to right, rapidly, because my time 

is—— 

Ms. VERMA. OK. I mean, I think you need to take a look at managing care, putting in more managed care. I think looking at expansion without addressing the core issues and where they are 

spending their money. I think they need to explore different innovations, value-based purchasing that we have talked about, you 

know, some sort of a reform on how providers—but I think it is 

also very critical to include the individual in that. 

Mr. SHIMKUS. The individual has to be in the process of—— 

Ms. VERMA. The individual has to be part of the equation. 

Mr. SHIMKUS. Dr. Thompson? 

Dr. THOMPSON. My quick advice to any governor, including my 

own, was, expansion without efforts to contain costs is a budgetary 

as well as a State failure. 

Mr. SHIMKUS. I will take that. Mr. Keck? 

Mr. KECK. I hesitate to make a suggestion for Illinois but—— 

Mr. SHIMKUS. Please. We need any help we can get. 

Mr. KECK. We want to meet our commitments, and I think we 

are not meeting our current commitments, and what we have told 

our legislature is, we have to pay for our current commitments before we expand. 

Mr. SHIMKUS. And just to finish with Dr. Thompson on this. So 

the way Arkansas has approached this, since ObamaCare has really—we are buying off expansion with a promise of federal dollars 

which we will then walk away from the new expansions after that. 

So your bet is, you are going to have a reformed system within 

your State that is able to carry the increased Medicaid individuals 

past a time frame when ObamaCare and the additional dollars are 

gone? 

Dr. THOMPSON. We undertook payment improvement 3 years ago, 

so it predates our expansion that will go into effect this year. Your 

premise is correct. It is not just for the Medicaid program, however. 

It is that we think our private sector, that our business sector, that 

our economic attractiveness will outpace with all due respect our 

sister States around us because we are going to both expand and 

get coverage in place at the same time we are reforming the payment system to make sure that it is sustainable. 

Mr. SHIMKUS. I appreciate that. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from California, Ms. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman, and thank you all for 

being here today and for your testimonies. 

As we know, Medicaid is a critical program. It serves over 70 

million families, seniors and individuals with disabilities. I think it 

is important to keep in mind that it is a safety net for these people 

who are otherwise shut out of private insurance, either because it 

is unaffordable, unavailable to them or doesn’t cover the benefits 

42 

that they need. So we know that individuals with Medicaid are 

more likely to receive preventive health care and less likely to have 

medical debt than their uninsured counterparts. Medicaid, like private insurance and Medicare, is trying to confront the same challenges of improving quality and cost. So a dialog today about improving the system to provide cost-effective, high-quality health 

care to many of these individuals who need it is really a valuable 

discussion to have. 

But I think we must be mindful about exactly who will be impacted by the decisions that we make or that Congress makes, and 

if we are truly improving care or just passing the buck to States, 

persons with disabilities, seniors, and struggling families, in other 

words, the vulnerable. We have a responsibility, I believe, to make 

our best-faith effort to improve the system on behalf of these individuals while protecting their access to affordable care. With the 

flexibility provided by Medicaid, a number of States have initiated 

quality improvement activities to improve access to preventive 

services, increased chronic-disease management and prevention, 

and addressed population health. 

So Dr. Thompson, you are here because the Arkansas Medicaid 

program has had great success in collaborating with health care 

providers and the Arkansas Foundation for Medical Care to improve quality of care and health outcomes. What are the quality 

issues? I know you have talked about this, but if you don’t mind 

restating them, the quality improvement initiatives and how do 

you rank your success to date? 

Dr. THOMPSON. Well, our State is burdened with a heavy risk 

burden in our population. Fifty percent of our citizens have a 

chronic disease. Our QIO, the Arkansas Foundation for Medical 

Care, has worked closely with our providers, both physicians and 

hospitals, particularly on the hospital side, reductions in readmissions, improvements in outcomes after delivery, more recently, efforts to reduce premature delivery that then result in negative neonatal outcomes. So there are real interests and opportunities with 

providers if the engagement is right, if the incentives are aligned 

correctly to move the system forward in a positive way. 

Mrs. CAPPS. So that is exactly what I was hoping we could get 

at. Could you speak to the success of this program and the ways 

that you have seen care coordination improve across the Medicaid 

providers, and do you believe this program, some of the models 

that you are using, could be enhanced and expanded so that other 

States could take advantage of it? 

Dr. THOMPSON. What we have done is, we have taken what was 

a quality improvement effort, which is what I have just described, 

and we have now tied the payment mechanism for providers to reinforce quality outcomes. We have actually taken, for example, our 

hip and knee surgeries and we have said there is a responsibility 

of the surgeon from 30 days before to 90 days after for the outcome, 

and now their payment is tied to what the outcome for that patient 

is. It increases engagement with the patient, it increases the decision process of the team, and we think it will reduce the cost and 

inefficiencies in the system over time. 

Mrs. CAPPS. Wow. And you have seen some indications that it is 

working? 

43 

Dr. THOMPSON. We are starting to see provider behavior change, 

both within the OB episodes, within the hip and knee episodes, 

within the hospitalization episodes, and as we talk to providers, almost every association says there is 20 to 30 percent waste in the 

system but nobody has ever aligned the financial payment mechanisms to have providers lead in eliminating that waste. 

Mrs. CAPPS. That is a good thing to discuss, ways to do that 

without making it seem punitive and punishing. Well, anyway, I 

wanted to get one last question on the table. The initiatives that 

you have undertaken, have they all been done within the current 

statutory and regulatory framework of the Medicaid statute? In 

other words, what kind of waivers have you used, how much of this 

have you been able to do straightforward? 

Dr. THOMPSON. Well, I hope they are all within the regulatory 

and statutory framework of the current Medicaid program, or 

somebody is in trouble. No, we have been able to do it. I think it 

is not an easy path. I think the current Administration is streamlining that path, and our recent experience has been much better 

than our past experience. Again, that is not with any prejudicial 

interest on prior State or federal Administrations. 

I do think that when a State has a desire to come with a plan 

that safeguards the beneficiaries and their needs, that fits into a 

long-term State plan and that moves the Medicaid system as a 

whole forward, is a prerequisite for successful negotiations between 

the federal and State government. 

Mrs. CAPPS. Thank you, Mr. Chairman. This was good to hear. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from Louisiana, Dr. Cassidy, 5 minutes for questions. 

Mr. CASSIDY. Thank you, Mr. Chairman. 

Dr. Thompson, I notice you are wearing Arkansas colors in your 

tie, so I will just say, I am an LSU guy, I couldn’t help but notice 

that. 

Listen, I was very intrigued by your testimony. You say that the 

State of Arkansas is contracting on a per-beneficiary payment to 

managed care companies. They are at upside and downside risk, 

correct? 

Dr. THOMPSON. We do not use a managed care mechanism so it 

is the State itself that is at risk for cost increases or cost savings. 

Mr. CASSIDY. But there is a per-beneficiary amount, because you 

mentioned there is an upside and a downside. 

Dr. THOMPSON. The upside and downside risk that I mentioned 

was actually what we have now shifted to our episodes of payment 

to providers. Providers now have the responsibility, upside and 

downside, for the outcomes of the episodes as I mentioned. 

Mr. CASSIDY. And I am sure they protested, but on the other 

hand, as you point out, they have been able to achieve cost savings 

and increased efficiency. 

Dr. THOMPSON. Actually, our providers are relatively, I will say 

with some caveat, supportive of our effort. They knew the system 

had to change. They did not want another bureaucrat layer put on 

top, and they said we will take responsibility for that clinical—— 

Mr. CASSIDY. I don’t mean to interrupt. So, if you will, you are 

capping the amount of money that goes per episode, and I guess 

44 

the point I am trying to make is that whenever my colleagues on 

the other side tend to suggest that any sort of cap whatsoever is 

going to be deleterious, in reality, you all have caps and you have 

actually seen success? 

Dr. THOMPSON. In actuality, sir, we have not capped anything. 

The providers—— 

Mr. CASSIDY. So when there is a bundle-of-care payment, that is 

not really a capped amount but rather it can be—— 

Dr. THOMPSON. It is not a cap. 

Mr. CASSIDY. So there is not a true upside and downside? 

Dr. THOMPSON. There is a target that the lead quarterback for 

the team will have financial impact, but every member of the team 

is still paid. 

Mr. CASSIDY. I understand they are still paid, but if they exceed 

that target, do they lose money? 

Dr. THOMPSON. Not the members of the team but the quarterback does. 

Mr. CASSIDY. The quarterback does. Yes, so for that particular 

quarterback, there is a cap. 

Dr. THOMPSON. There is a target. 

Mr. CASSIDY. I think we must be using terminology because if 

there is a downside for them, then effectively there is a cap. 

Dr. THOMPSON. Again, sir, I would be glad to share, but we have 

not capped any provider’s payment. We have set goals that they 

share in the gains—— 

Mr. CASSIDY. Then somebody I don’t understand how your downside works, but let me ask, Mr. Keck speaks about how really on 

a county-by-county basis for somebody, there should be variability. 

I have to imagine our States are similar, that in the Delta there 

is a different patient population and different structure of health 

care as opposed to Fayetteville. 

Dr. THOMPSON. And without question, different health care 

needs. 

Mr. CASSIDY. With that said, who is better equipped to make 

that determination? The county or the State official or rather somebody in Washington, D.C.? 

Dr. THOMPSON. Well, I would say it would be a local provider, 

local community. 

Mr. CASSIDY. That seems right. So I think when Mr. Keck speaks 

about the flexibility, I think that is something we can all agree on. 

Next I would ask, on the other side there is a lot of defense of 

the status quo in terms of Medicaid, but Dr. Thompson, would you 

agree, I mean, are you aware that some States really manipulate 

the Medicaid system in order to maximize federal payments to 

their State? For example, New York, which has half the population 

of California, gets 33 percent more federal payments than California. 

Dr. THOMPSON. I am aware of different strategies that States 

have employed that don’t necessarily tie directly to patients. 

Mr. CASSIDY. Yes, some people call it gaming, and that seems to 

be the legal way to describe it. I am struck that even the Democratic witness would agree that there is some problems with the 

status quo, which it seems as if the other side doesn’t want to 

admit. In fact, I noticed that you were nodding your head yes when 

45 

Ms. Verma stated that when Medicaid empowered patients to consider cost savings, there was actually good results that result from 

that. Could you accept what Ms. Verma was saying? 

Dr. THOMPSON. Well, I think our approach through our Medicaid 

expansion will have cost sharing on individual patients. 

Mr. CASSIDY. So I was struck that Mr. Waxman suggested if any 

of that occurs, it is going to be terrible for the patient, but in reality, I think I am hearing from the witnesses that there is actually 

some positive things that happen both for the patient as well as for 

cost savings. 

Dr. THOMPSON. But it is with safeguards on the patient. 

Mr. CASSIDY. Of course. Everybody accepts safeguards, but on 

the other hand, status quo is status quo, and right now if we can 

do something different, we may improve. I think even our Democratic witness is not agreeing with Mr. Waxman on that one. 

Mr. Keck, you seem to suggest that the States could accept some 

limitations on payments as long as they had flexibility and net they 

would come out better. Would you agree with that? 

Mr. KECK. And that is how we pay our managed care plans. We 

capitate them and give them a lot more flexibility and negotiate 

rates, to change benefit structures. They take significant risk. We 

are able to put high accountability on them in terms of performance measures. 

Mr. CASSIDY. So when Mr. Waxman suggests that any cap whatsoever is unworkable and any flexibility given to the States to manage is going to be terrible for patients, you are saying that wouldn’t 

necessarily be the case? 

Mr. KECK. I don’t believe that would be the case at all. 

Mr. CASSIDY. You have experience in two States with high poverty levels, both Louisiana and South Carolina, so you really are 

where the rubber meets the road, not an ivory tower in Washington, D.C., but really where you have to see those patients in 

New Orleans get care. Is that a fair statement? 

Mr. KECK. The rubber meets the road in both South Carolina 

and Louisiana. 

Mr. CASSIDY. OK. I am out of time, and I yield back. Thank you. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Texas, Mr. Green, for 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

I know our committee started out with concerns about the reimbursement rates. I assume reimbursement rates in Indiana, South 

Carolina and Arkansas are the same as in Texas. Reimbursement 

rates for Medicaid are set by the State, correct? 

Ms. VERMA. That is correct. 

Mr. GREEN. And I know the pecking order. You know, you have 

private insurance here, you have Medicare here, you have Medicaid 

here, and I found out when we started mobilizing our reserves in 

Houston 10 years ago how low TriCare reimbursed our physicians 

and hospitals. But that is set by the State. 

The other issue was, I don’t think that in 3 years the federal government is going to walk away from—now at 3 years it is 100 percent and after that is 90 percent reimbursement. Is that correct? 

Ms. VERMA. Yes. 

46 

Mr. GREEN. I wouldn’t quite call that walking away from the 

Medicaid responsibility. But anyway, just so we know that. 

I have a district in Texas, a very urban district, and one of the 

highest uninsured rates in the country. I am disappointed our legislature did not do something with expanding Medicaid similar to 

what Arkansas has worked on, and every once in a while I am jealous of Arkansas’s football program too when they beat a Texas 

school. But I would hope we would see that change. 

One of my concerns is the churning rate, and in Texas we make 

folks come in for Medicaid every 6 months and even for the SCHIP 

program. Do any of your States have a longer term for enrollment 

than 6 months? Does Indiana have 6 months or a year? Arkansas? 

Mr. KECK. We make people redetermine every 12 months, but if 

they have a change in status—— 

Mr. GREEN. Oh, sure, if they have a change in status, but you 

don’t make them show up and redo it every 6 months? 

Mr. KECK. No, and we do redeterminations through express-lane 

eligibility, which we found to be very effective. 

Mr. GREEN. What about Arkansas? 

Dr. THOMPSON. Ours is 12 months. I think important to your 

churning question, our expansion effort, which will use private 

plans, we believe will largely eliminate the churn process entirely. 

People will stay in the plan. The plan will re-enroll them. They will 

not have to touch the Medicaid program. 

Mr. GREEN. Ms. Verma, what about Indiana? 

Ms. VERMA. Yes, in Indiana they have continuous eligibility. If 

there a change, it has to be reported. 

Mr. GREEN. Sure. That seems reasonable. If there is a change, 

you have the opportunity to go in and check it and do that. 

Congressman Barton and I both identified that as one of the concerns we have because as a former State legislator, I also know we 

can quantify if we do it every 6 months and 1 year as compared 

to a year how much money we can save over that period of time 

making Medicaid recipients come back and sign up, and I have 

seen the lines out in front of the offices. So hopefully we will look 

at that piece of legislation to have that, unless it is changed circumstances. That is the issue. 

Let me talk about Arkansas a little bit. Again, congratulations, 

Dr. Thompson, on some of the considerations. What do you think 

the consequence of not expanding Medicaid would have been for 

Arkansas? 

Dr. THOMPSON. I believe our health care system was at a tipping 

point. I mentioned earlier we had 25 percent uninsured statewide. 

We had some counties that were approaching 40 percent of the 19- 

to 64-year-olds. These people were consuming care but not able to 

pay for it. Our providers were not able to stay in business to provide it. I think we were at a tipping point that the opportunity 

under the Affordable Care Act, which I won’t speak for or against, 

but as an implementer of the Affordable Care Act, I think it led 

a safe line, particularly for our rural health care providers where 

the uninsurance rates were much higher. 

Mr. GREEN. Well, and again, I am concerned because our percentages are the same as Arkansas but with a lot more folks that 

are losing that kind of opportunity to have it. 

47 

Mr. Keck, South Carolina has both a lower rate than Texas for 

churn because you do it on a year. Mr. Keck, in addition to the 

CHIP law, Congress enacted provisions that provide bonus money 

for States to go out and exceed expectations on enrolling low-income Medicaid children. I understand South Carolina received 

CHIP bonuses in 2011 and 2012. Would you agree that the bonus 

program is good and positive incentive for States to find and enroll 

lower-income children? 

Mr. KECK. Yes. 

Mr. GREEN. Do you know how much money the South Carolina 

program received? Because all that money goes back into Medicaid, 

I assume. 

Mr. KECK. We don’t have our latest bonus calculated but we are 

committed to—when our legislature sets an eligibility limit, we are 

committed to getting everybody enrolled under that eligibility limit. 

Mr. GREEN. And again, I know private-sector employees offered 

health care benefits with continuous coverage for their employees 

as long as they remain there, and again, Mr. Chairman, I would 

hope we would look at considering that bill that Congressman Barton and I have, and I yield back my time. Thank you for being 

here. 

Mr. PITTS. The chair thanks the gentleman. The chair recognizes 

the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you, Mr. Chairman. I welcome the panel, 

particularly Dr. Thompson. I come from a long list of Murphys in 

Pennsylvania who are physicians: Garland Murphy, Dodie Murphy 

of Springdale, and I don’t know if you know any of those but if you 

do, please extend my greetings to them. 

I wanted to ask you first, Dr. Thompson, some questions about 

where Arkansas stands. Your state has recently agreed to this 

Medicaid expansion proposal that carries with it the assumption 

that HHS will let you have approval. Now, my understanding is, 

HHS and CMS have consistently noted publicly that nothing is approved for your State. In fact, Administrator Tavenner recently 

said before the Senate Finance Committee: ‘‘We haven’t approved 

anything.’’ So could you outline for this committee what Secretary 

Sebelius in coordination with OMB has explicitly agreed to allow 

Arkansas to do in 2014 as it relates to individuals not currently enrolled in your Medicaid program under 138 percent of federal poverty level? 

Dr. THOMPSON. First, let me deal with the approval issue. Approval for a State-federal waiver is actually a financial contract. So 

until it is signed by both parties at the end of the process, there 

is no approval. Where we are in our process, what we call the private option on Medicaid expansion, which is to take Medicaid dollars and use them essentially for premium assistance on the private health insurance exchange is an accepted concept. Premium 

assistance has been used before by Medicaid programs in limited 

way to buy private employer-based coverage when it was more efficient, effective and cost beneficial to the Medicaid program. We are 

extending that in concept to be premium assistance for all newly 

eligibles on the newly established insurance exchange. We think 

that by harmonizing both the cost sharing on individuals above and 

48 

below the Medicaid eligibility line, that we will educate our Medicaid eligibles on how to use the health care system as they then 

go up into the health insurance system. They will be better informed and prepared to use the health care system in a more appropriate way. We will eliminate churn, as we talked about before, 

because people will be in a health plan and probably stay in a 

health plan year after year. The health plan will want them to. 

So where we are now is, we have a conceptual agreement of 

where we are going. We are working through the specifics of what 

will end up being a streamlined waiver to get to the essentially 

contractual agreement between the State and the federal government on guarantees of coverage and the financial aspects of the 

agreement. 

Mr. MURPHY. Let me add one other thing that you can provide 

for us as a follow-up, that is, to provide us with updated projected 

State and federal 10-year costs if Arkansas did not expand and 

thus the individuals above 100 percent of federal poverty level acquired private coverage, and two, expanded and every individual 

would be under traditional Medicaid below 130 percent of federal 

poverty level, and three, to move forward under the legislature per 

your proposal. That is information I would like you to get for us 

in the future. 

Dr. THOMPSON. Sure. 

Mr. MURPHY. Mr. Keck, I think in your testimony you said that 

30 percent of health care is waste? 

Mr. KECK. According to the Institute of Medicine and many other 

sources. That is the latest estimate. 

Mr. MURPHY. Let me ask you this. When Medicaid dollars come 

through in the federal government, the State level and other 

things, what percent of that is spent on a wide range of administrative costs that never get to actual patient care? Do you have 

some estimates of that? Under the current way things are spent, 

do you have any idea? 

Mr. KECK. Well, if you just look at the Medicaid expenses in 

terms of administering the program on the fee-for-service side, it 

is about 3–1/2 percent. On the managed care side it is about 9–1/ 

2 percent with a percent of that at risk, but that additional expenditure is because they are managing the care better. 

Mr. MURPHY. So when that is being, rather than that being seen 

as three times the cost and they manage the care better, there is 

an actual difference in improved health care outcomes when they 

specifically coordinate that care of that patient? 

Mr. KECK. Absolutely. I mean, on an annual basis, our legislature requires that we compare the cost of our managed care programs on a per-member per-month basis to that of the fee-for-service program, and even with the additional costs, managed care is 

cheaper than fee-for-service and it produces better outcomes. 

Mr. MURPHY. One of the things I look upon, when the managed 

care movement hit in the 1990s, I didn’t care much for it because 

much of that was managed money and not managed care. That is 

why I like it at more as coordinated care where physicians and 

nurses are in charge of decisions. 

Let me ask another way this can be coordinated. The Federally 

Qualified Community Health Centers, can you tell me how your 

49 

State may work with them with Medicaid to make sure, because 

I am concerned, a lot of people on Medicaid don’t really have a primary person they keep going to as their home. Too often their lives 

are disrupted. They go from person to person to person. Can you 

give me as an example if that is something you work with in your 

State to help coordinate that? 

Mr. KECK. Absolutely. I mean, in a broad sense, we are working 

with all primary care providers. We are now making patient-centered medical home incentive payments. If you become certified, 

you get a per-member, per-month bump to encourage people to become certified and eventually we will convert that into broader care 

management payments to these folks. But specific to the Federally 

Qualified Health Centers, I think when we talk about the rates of 

uninsurance, we forget that in most States we have very robust 

networks of Federally Qualified Health Centers that were chartered to serve these folks, and we spend a lot of money on them 

and are a great resource, and this year in South Carolina we are 

actually putting quite a bit of additional investigation, probably the 

largest single investment that has been made by the State in the 

history of the Federally Qualified Health Centers to expand the 

presence of those and their ability to work with patients. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Virgin Islands, Dr. Christensen, for 5 minutes 

for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Just for informational purposes, I noted from a Kaiser report 

that in 2001, there were 36.6 million people enrolled in Medicaid, 

and by 2009, there was as many as 62.9 million. That was the year 

that President Obama took office. Just for informational offices. 

Dr. Thompson, as a person who worked with some of my colleagues when we were drafting the Affordable Care Act who advocated for everyone to participate in the exchange including those 

who were previously on Medicaid, I was really pleased to read and 

hear from you that you are transitioning to premium assistance, 

and so you are really demonstrating flexibility and the support over 

the last 3 years of CMS and the Department. So I want to applaud 

Arkansas’s creativity and I want to say that I enjoyed being in Little Rock last year when the University of Arkansas and the Clinton 

Foundation joined several of us in having the conference on health 

disparities in Little Rock last year. So thank you for that. 

Are you using navigators of any kind as you plan that transition? 

Because many of the Medicaid beneficiaries would not have much 

experience in going to a private insurance market. 

Dr. THOMPSON. Since the action of our general assembly, we have 

actually increased the number of navigators our health insurance 

department planned to hire on a short-term basis to reach the 

lower-income community, communities of color, those that are Medicaid eligible in a more successful way. We are also looking at information we now have inside the Department of Human Services, for 

example, parents of children that are on the Our Kids program so 

that we may have already determined who is likely to be eligible 

for the private option, if you will, through the exchange that we 

have already done an income eligibility assessment. 

50 

Mrs. CHRISTENSEN. And when we were talking about this back 

4 years ago or so, there was concern about wraparound services in 

Medicaid that might be lost. Are you seeing that your Medicaid patients would lose anything by going to the exchange? 

Dr. THOMPSON. This is one of the issues that we are in negotiations with CMS about. All of the Medicaid eligibles are eligible for 

wraparound services. However, a majority don’t use those. They 

are able-bodied, working individuals that are just low income, and 

so it is those individuals that we anticipate putting into the private 

market, letting them have a private experience, not be, if you will, 

managed by the State, but for those whom the private market is 

not going to be best mechanism, we will retain them in the State 

Medicaid program, assure them of the wraparound services and 

make sure that they get the guaranteed benefit as required under 

federal law. 

Mrs. CHRISTENSEN. Thank you. And in the wake of the Newtown 

shooting, again to Dr. Thompson, last fall, and the recent shootings 

in Santa Monica, our Nation remains concerned with access to 

mental health services to people with mental illness. Congress 

passed mental health parity legislation in 2008 and additional provisions were included ensuring parity for mental health services in 

the Affordable Care Act. A significant barrier to access is, of course, 

not having health insurance, so how do you anticipate the Medicaid 

expansion will help Arkansas to address the issue of access to mental health services and what challenges do you see in the State for 

improving that access? 

Dr. THOMPSON. Yes, I believe the requirements under the essential benefit plan of the Affordable Care Act and our actions on the 

Medicaid program to buy into that essential benefit plan will singularly help both the mental health and the substance abuse community because it brings to true parity finally the financing mechanism for those services. It will have an effect on our workforce. We 

are going to have to look at the organization of our mental health 

workforce to make sure they are in the right place because rural 

Arkansas does not have as deep a bench when it comes to that 

workforce but I think financial barriers have been the number one 

reason we haven’t had the right providers and the right place at 

the right time, and through we are trying to solve that first barrier. 

Mrs. CHRISTENSEN. Thank you, and I am sure you have seen this 

report by NAMI, the National Alliance for Mental Health, titled 

‘‘Medical Expansion and Mental Health Care.’’ They quote an analysis by SAMHSA that shows that if all States proceed with expanding Medicaid, as many as 2.7 million people with mental illness 

who are currently uninsured could get coverage that includes almost 1.3 million with serious mental illness, and Mr. Chairman, I 

would like to submit this report for the record. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mrs. CHRISTENSEN. Thanks. I also want to agree with your statement, Dr. Thompson, that caps of any kind are a risk to the beneficiary, and I would like to add my own point of view that not setting the FMAP according to the jurisdiction’s average income also 

presents a risk, and I want to thank the committee for, one, inVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
51 

creasing our cap in the territories although we did not remove it 

entirely but I am still asking the committee to help me in passing 

my bill to change the match to give the territories State-like treatment. It costs nothing to the federal government but it saves lives 

and decreases the risk for our beneficiaries. 

Thank you. I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentlelady and now recognize 

the gentlelady from North Carolina, Mrs. Ellmers, for 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panelists today for this important subcommittee hearing. 

I am a representative of North Carolina. North Carolina has chosen not to opt in to the Medicaid expansion, and I applaud that decision that Governor McCrory and the State legislature made. Just 

to quote Governor McCrory, ‘‘The federal government must allow 

North Carolina to come up with its own solutions.’’ It is a $13 billion program and he refers to it routinely as ‘‘broken’’, and because 

of that does not want to expand a system that is in much need of 

fixing. 

So with that, and again, I appreciate your testimony today on 

this issue, I have a question for Ms. Verma and Dr. Thompson in 

relation to what Director Keck has basically said in his testimony, 

notes that he sees an opportunity for bipartisan agreement that 

States need more flexibility to manage programs locally in exchange for more accountability to improve health and reduce costs. 

Ms. Verma and Dr. Thompson, do you agree that Washington’s approach, you know, this far with Medicaid is outdated, and do you 

also believe that States have the ability that they can with outcome 

measures and greater flexibility improve care and reduce costs? 

Ms. VERMA. Yes, I do. 

Mrs. ELLMERS. Thank you. 

Dr. THOMPSON. I think the whole health care system is going 

through a great transition and that States are bringing innovative 

ideas. I think this Administration and the new Center for Innovation has 41 different models for States to choose from, and I think 

the partnership between the federal and State government should 

be maintained because that is how we are going to get the whole 

U.S. health care system to a different place. 

Mrs. ELLMERS. I also have a question, Mr. Keck, for you. In 

South Carolina, I know that South Carolina is working with CMS 

right now on integrating physical and long-term care services for 

65,000 enrollees. Can you speak to the status of those negotiations 

and maybe give a little bit of a timeline where we may go with that 

in implementation? 

Mr. KECK. Well, we are very supportive of the dual integration 

to manage Medicaid and Medicare patients together under a cap, 

I might add, per member. We have a good working relationship 

with the Office of Dual Eligibles and are working hard on that, but 

to be honest, it is a very, very slow process. I think that is the experience that most States have encountered, and it is primarily because of working with the particular restrictions that Medicare has 

on the program, but we hope to get to a memorandum of understanding by the end of this month or the end of July and go live 

by the middle of 2014, which is about 6 months behind schedule, 

52 

but we think it is a good effort, and it is a needed effort. The dual 

eligibles are a very large portion of our expenditures, and for both 

Medicare and Medicaid, we have been doing great disservice to the 

taxpayers and to the individuals to not manage these folks together. 

Mrs. ELLMERS. I agree. Thank you so much. 

And my last question, I have about a minute left. Ms. Verma, 

can you elaborate a little more on some of the innovations that 

your State is making right now to improve upon the Medicaid system? 

Ms. VERMA. I work with a lot of different States, so it is kind of 

hard specifically, but I will take the Indiana example because I 

think that is the one that I have worked extensively, and I think 

other States are looking at Indiana because of some of the innovations it has done. I think what they have really done, as we discussed earlier, is trying to empower the individual and have the individual as part of the equation. I think some of the cost sharing 

policies are where Indiana and other States are seeking waivers, 

and it is not—you know, the cost-sharing policy is not to burden 

the individual or to, you know, try to ration care or limit them from 

getting care. I think it is to incentivize them and to empower them 

to be a part of the equation. And so I think that that is where a 

lot of States are very interested in those types of programs that 

really do put that individual in the position of focusing on prevention, focusing on outcomes, and I think a lot of the programs, you 

know, that are based on the physicians—we have talked a lot today 

about outcomes and physician outcomes. Well, the individual has 

to be a part of that. The physician is not going to be able to achieve 

those without it, and I think outcomes are also not just for the physicians but even for States, and we need to hold states accountable 

for outcomes as well, and so we need to align the providers, the individuals and States together in the same direction. 

Mrs. ELLMERS. Thank you so much for your testimony, and I see 

my time is expired. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Well, thank you, Mr. Chairman, and thank you very 

much to the panel today. 

Over the past decades, the federal-State partnership that is Medicaid has evolved and it has changed into more of a managed care 

system. More States have adopted managed care. CMS has been 

granted great flexibility for States to tailor managed care Medicaid 

services. 

I am concerned, though, that we lose some control to the managed care companies, some accountability. Could you all give me 

your opinion and identify the most effective waiver conditions, 

oversight initiatives in the states to ensure that our tax dollars actually go to medical care and health services and not to excessive 

administrative costs or to excessive profits for insurance companies 

and HMOs? 

Ms. VERMA. I think there are a lot of strategies that States can 

take in their managed care contracting, and it all has to do with 

how that contract is set up. I think they can put in medical loss 

ratio requirements that would limit the amount of dollars that are 

53 

spent on administration and on profit. There are outcomes measures, and I think that is one of the main differences between State 

government and contracting out with a managed care company is 

that you can require outcomes of managed care companies. You can 

have standards for access, standards for maternal and child health 

outcomes in terms of low-birth-weight babies. You know, whatever 

a State wants to attach to the contract, they can in terms of outcomes, and that is something that you don’t have with, say, government with its regular fee-for-service within the Medicaid program 

there is no accountability for the outcomes they achieve. 

Dr. THOMPSON. I would concur with Ms. Verma. I would add, I 

think it is important to start with what the beneficiaries’ needs are 

and make sure that the outcome indicators, the expectations of the 

managed care plan, a managed care plan that covers both an urban 

and a very rural area, network adequacy is an important issue so 

that access issues become important, and I think in the 30, 35 

States that have large rural areas, an important aspect is, how are 

we going to actually manage care in a decentralized, relatively 

fragmented health care system. 

Mr. KECK. I would agree with both those statements. We have 

had much better luck actually assuring network adequacy in our 

State working with our managed care companies because they are 

able to negotiate individual rates and so if they are having a hard 

time getting a doctor in a particular area, they can pay more. We 

can’t do that through our fee-for-service program. So we are very 

specific and spent a lot of time understanding our network through 

geo coding and so on. And we also put our plans at financial risk 

now for outcomes, and they have both incentives and they have 

withholds. 

Ms. CASTOR. So if they drop the ball, they are not providing the 

services. Are there penalties built into the waiver conditions or the 

contracts, and are you aware of States really holding their feet to 

the fire and providing proper oversight? 

Mr. KECK. We don’t operate our managed care under a waiver 

but through the contracts, we do hold their feet to the fire, and the 

amount of potential penalty that we have this year on our managed 

care plans could potentially be their entire profit margin, and so 

we are moving forward very aggressively with that. Some States 

are even more aggressive. But again, we clearly measure our outcomes and our cost per member per month, and we know that managed care, coordinated care is making a difference. We think there 

is a long way to go in terms of better managing care on the ground 

but this is the tool to do it. 

Ms. CASTOR. Dr. Thompson? 

Dr. THOMPSON. I think we are taking a little bit different, maybe 

a next-generation approach with our payment improvement initiative. We are asking the lead provider to manage the clinical risk 

and to have financial incentives, upside and downside, while we 

are retaining the actuarial risk, kind of the chance that somebody 

who has a hip replacement also has a heart attack back with the 

insurance company or with the State. So I think both are actually 

trying to put alignment of financial incentives with the outcomes 

that the State, the Medicaid program, the federal government deVerDate Nov 24 2008 15:24 Dec 03, 2013 Jkt 037690 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-51 CHRIS
54 

sire, and I think we need to probably accentuate the sharpness of 

our knife that we start looking. 

Ms. CASTOR. In Arkansas, do you all have managed care or waiver for the elderly population, skilled nursing and services that keep 

folks out of—because Florida is about to embark on privatization 

of managed care for that population. That is news to us. All of the 

providers are scared to death. They don’t want to go through a 

gatekeeper. What has your experience been? 

Dr. THOMPSON. We have not used a third party, a managed care 

entity, to exercise that option. We do have a waiver, our home- and 

community-based service waiver, that allows the family to use the 

allocated resources that would have been spent inpatient in a nursing home for skilled or family-assisted living to help them stay at 

home. So we have a waiver in place. It is actually high sought after 

by our families to keep their loved one at home. It does not use a 

third-party manager in a manager care type of arrangement. 

Ms. CASTOR. Thank you very much. 

Mr. PITTS. The chair thanks the gentlelady. I recognize the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I appreciate that. 

According to the CBO, Medicaid will cost the federal government 

$5 trillion over the next 10 years with as much as $638 billion of 

that directly linked to the expansion of Medicaid from PPACA. Recently, the Governor of my State, Governor Bob O’Donnell, laid out 

the need for vast reform to make Virginia’s Medicaid program more 

cost-effective before the Commonwealth can consider an expansion. 

The State legislature set up a system where they can consider expansion if these reforms are met, and there were five tenets that 

he laid out for Medicaid reform: one, service delivery through efficient market-based system including more managed and coordinated care; two, reducing financial burdens to the State by getting 

assurance from the federal government that expansion will not increase the national debt; three, maximize the waivers that currently exist to achieve administrative efficiency through streamlining of payment and service delivery; four, obtain buy-in from 

health care stakeholders in the State for statewide reform; and 

five, achieve greater flexibility by changes to federal law including 

value-based purchasing, cost sharing, mandatory engagement in 

wellness and preventive care, the development of high-quality provider networks and flexibility around essential health benefits. 

That is a mouthful. The bottom line is, these reforms that Virginia 

is now discussing are on part with the plan laid out by Chairman 

Upton and Senator Hatch to provide States with more flexibility to 

implement their Medicaid programs in a way that makes sense for 

them while better controlling costs. 

Ms. Verma, how do you feel about these Medicaid reforms that 

Virginia is currently exploring? What can we do to help the States 

better service the vulnerable populations that need Medicaid while 

giving the States the flexibility that improves the quality of their 

program, promotes access and gets costs under control? 

Ms. VERMA. I think that Virginia has all the right elements 

there. I think they have covered the span of identifying incentives 

for providers and individuals but I think the key part there is that 

they are going to need flexibility from the federal government to 

55 

implement those pieces, so that will be a critical component. But 

I think they have the required elements of a reform package. 

Mr. GRIFFITH. So you think that that is a good first step? 

Ms. VERMA. I think it is a good approach. I am, you know, glad 

to hear that they have also included the individual in that piece. 

I think that is important. They have got the providers. They are 

looking at the benefits. And I think they also recognize the important role that the federal government plays in this to making that 

happen. 

Mr. GRIFFITH. Now, as a part of that flexibility for the States, 

how do you feel about the situation where, you know, yes, we want 

to reward folks for doing the right things but what if they consistently do the wrong things? Do you think there ought to be some 

kind of a stick that can also be applied in that flexibility if somebody continually goes to the most expensive health care provider 

because they just don’t seem to care that they are running up the 

cost? 

Ms. VERMA. Absolutely, but you have to use those sticks appropriately. You have to be mindful of the population. I think that the 

carrots and sticks work differently, the different populations. I 

think a disabled population, those are a little bit harder to apply. 

However, as we are talking about Medicaid expansion and ablebodied individuals, I think those are probably more appropriate 

populations that those could be effective. 

Mr. GRIFFITH. And that does make sense. 

For everyone, there is always a lot of debate around when States 

can and cannot implement cost sharing. From your perspectives, 

when does cost sharing work and what can be done to really allow 

the customization of cost sharing at a local level? 

Ms. VERMA. I think cost sharing needs the most work. I know 

CMS did put some proposed rules out that increased the cost-sharing levels. I think it is a very rigid structure. It only requires 

copays. There is no opportunity to enforce premiums for people 

below 100 percent of poverty. There is no flexibility to do valuebased where you would be able to vary the copays depending on the 

types of services. And I think the enforcement piece of critical. I 

mean, what happens with copays and the way that they have it 

structured is that it ends up being a decrease in the provider reimbursement because providers can’t collect it. 

Mr. GRIFFITH. And let me go to the others. I only have about 45 

seconds left. 

Mr. KECK. I will add to that. My hospitals would be remiss if to 

that particular question about cost sharing, I didn’t mention that 

we need to do some reforms to EMTALA because EMTALA has 

turned into sort of a blanket reason to be able to use the emergency room without regard for appropriate use. 

Mr. GRIFFITH. Sure. Dr. Thompson? 

Dr. THOMPSON. I think we are on a path to change the Administration’s proposed rule, which we have incorporated into our private option. It is on the right path. I think it is a complex system, 

and at some point, cost sharing, if you are only making $6,000 a 

year, does become a barrier to access. The other piece that we have 

had to work with on our providers and our workforce strategy, if 

you are working an hourly job and the doc is only open 8 to 5, you 

56 

are going to end up going to the emergency room. So we need our 

docs have an after-hours clinic and weekend clinics where people 

are going to do exactly what you would expect them to do. They 

are not going to lose an hour’s wage to go to the doctor in the middle of the day when they can go to the emergency room at night. 

So this is part of a total system change. It involves workforce, it 

involves access, and most importantly, it does involve finance. 

Mr. GRIFFITH. I thank you all for being here. Mr. Chairman, I 

yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. I yield my 5 minutes to 

Dr. Burgess. 

Mr. BURGESS. I thank the gentleman for yielding. 

Dr. Thompson and Mr. Keck, really to both of you, there seems 

to be a good deal of antipathy toward the fee-for-service system, 

and yet the fee-for-service system is what many doctors have grown 

up with, what we rely upon. I would submit—and I realize that the 

Medicaid system is not directly analogous to the food stamp system 

but I suspect that if you tried to do a food stamp system that was 

not fee-for-service based, taking the basket to the marketplace and 

not paying a fee for every service that you loaded into the cart 

would be problematic. Is that an unfair observation? 

Mr. KECK. Well, I think fee-for-service is not universally the 

cause of all our problems, and there is actually within the system 

places where you want to use fee-for-service to encourage volume 

and productivity, and there are other areas where you want to use 

bundled payments and capitation and so on to encourage parsimony in the use of services. 

Mr. BURGESS. Dr. Thompson, do you have an observation on 

that? 

Dr. THOMPSON. Yes. I would just offer, our payment improvement still pays claims in the same way that we did under a feefor-service system, so we are still paying providers for the care at 

the point of delivery when they have care. What we have done is, 

we have put a quarterback on the team that now has the responsibility for the outcome. 

Mr. BURGESS. Let me ask you a question about that. Is the quarterback always a physician? You referenced prenatal care. Is the 

quarterback always the OB doctor in that instance? 

Dr. THOMPSON. The quarterback has been decided by our multipayer effort to date consistently. It is the provider who has the 

most influence on the system, the most ability to make change and 

the most financial interest. It is usually the physician. With respect 

to congestive heart failure readmission rates, it is the index hospital because they know when they are discharging the patient 

and—— 

Mr. BURGESS. But they own all the doctors now so there is no— 

it has to be the hospital. There is no other entity to be identified. 

Well, you know, when I think about the food stamp system and 

the Medicaid system, when I go to my market at home and I am 

behind someone in line who has the Lone Star code, which in Texas 

is the food stamp, the way that is utilized, there oftentimes will be 

57 

a brief discussion between the cashier and the individual buying 

the products, and, you know, they have identified out of a large 

bill, here is a certain number of dollars of things you have picked 

up that are not covered and you will have to pay cash for those, 

and there is no effort to embarrass the person. It is just simply 

they pay the dollars that are required. Why would it be hard to 

construct a system like that within the Medicaid system? That is, 

the patient comes and in fact some of the bill could be borne by 

the patient. You referenced the harshness of copayments or people 

who would have to pay some of their own money, but it seems like 

there has got to be a happy medium there where some additional 

money can be brought to the system by the person who is ultimately utilizing the system. 

Dr. THOMPSON. Well, let me use your food stamp example. Our 

payment improvement effort is like sending a nutritionist through 

the aisle with the patient, with the individual, so we are actually 

putting a nutritionist with that food stamp recipient as they buy 

their food. To your issue on sharing, that is exactly what the Affordable Care Act does through the exchange. We set an essential 

benefit plan. There is a tiered level of coinsurance, co-risk that decreases the lower a family’s income is. What we have done in our 

State is, we have layered one more layer underneath that that says 

for the poorest of the poor, we will put some cost sharing in place 

but we are going to offer some protections. 

Mr. BURGESS. And let me ask you a question about the concept 

of premium support because, I mean, to some degree that has gotten a bad rap here in Congress. It is called a voucher, and it is 

talked about in a derogatory term, but it sounds like you are using 

that to your advantage. Premium support is part of your so-called 

private option. Is that not correct? 

Dr. THOMPSON. We believe, our Republican leadership and our 

Democratic Governor believes using the private sector with competition for provider rates and with competition for patients essentially is the best way to consider expanding Medicare because it is 

not a traditional State Medicaid expansion. It does not have the 

cliff of people then wanting to stay on Medicaid and not moving to 

private insurance. 

Mr. BURGESS. Let me ask you this, because Dr. Murphy asked 

a question about the Federally Qualified Health Centers. The liability coverage is handled differently in a Federally Qualified 

Health Center. Texas several years ago experimented with providing the first $100,000 of liability coverage to a provider who was 

doing a certain percentage of Medicaid in their practice. Have you 

looked at that in Arkansas as a possibility? You need to bring providers into the system. Most of us recognize that it is that first 

$100,000 of liability that is where the real vulnerability exists. 

Medicaid patients do sometimes carry higher liability risk. Have 

you looked at that in Arkansas? 

Dr. THOMPSON. We have not looked at that as a way of recruiting 

providers. We have a relatively high provider participation rate because we use electronic payment within 72 hours of service delivery. So our discounted prices we have combated with increased 

cash slow and responsiveness to treatment, but that has been our 

58 

tool. I think your suggestion would be very open to our medical society and probably our Medicaid program. 

Mr. BURGESS. Is that something you are willing to look at? 

Dr. THOMPSON. I would be glad to. 

Mr. BURGESS. Thank you. 

Mr. Chairman, I have a series of questions on Medicaid as the 

payer of last resort. I guess the appropriate think would be to submit that for the record because I would like each of you to respond 

to that. The Government Accountability Office did a study back in 

2006 and looked at the States that were collecting from—that were 

covered under Medicaid but also had simultaneous coverage under 

either an individual plan or a group plan. For each of your States, 

it is about a 10 percent rate of people who are covered, have dual 

coverage, and I would just be interested in your thoughts as you 

expand managed care, are we going to make that problem worse, 

and how can we get at—I mean, when you talk of $750 billion a 

year, 10 percent of that is a lot so we really ought to attempt to— 

we can’t just leave that money on the table. If it is owed by private 

insurers, it should be paid by private insurers. But I will submit 

that in writing. I would each of your responses to that. 

And finally, Mr. Chairman, I would like to ask unanimous consent to put into the record an article from the New England Journal of Medicine titled The Oregon Experiment: Effects of Medicaid 

on Clinical Outcomes. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. That concludes the questions from the members. The 

members will have additional questions that we will ask them to 

submit in writing. We will ask the witnesses to please respond 

promptly. 

Thank you very much for your testimony today, and let me remind members, they have 10 business days to submit questions for 

the record, and members should submit their questions by the close 

of business on Wednesday, June 26. 

It has been a very informative hearing. Thank you very much. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 11:50 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

59 


85441.019

Testimony 

Expanding Medicaid Is the Best Financial 

Option for States 

Carter C. Price 

RAND Office of External Affairs 

CT-393 

June 2013 

Testimony submitted before the House Energy and Commerce Committee, Subcommittee on Health June 12, 2013 

This product is part of the RAND Corporation testimony series. RAND testimonies record testimony presented by RAND associates 

to federal, state, or local legislative committees; government-appointed commissions and panels; and private review and oversight 

bodies. The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address 

the challenges facing the public and private sectors around the world. RAND's publications do not necessarily reflect the opinions of 

its research clients and sponsors. RANO® is a registered trademark. 
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Published 2013 by the RAND Corporation 

1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 

1200 South Hayes Street, Arlington, VA 22202-5050 

4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 

RAND URL: http://www.rand.org/ 

order RAND documents or to obtain additional information, contact 

Distribution Services: Telephone: (310) 451-7002; 

Email: order(cl)rand.ora 
61 


85441.021

Carter C. Price 1 

The RAND Corporation 

Expanding Medicaid Is the Best Financial Option For States2 

Before the Committee on Energy and Commerce 

Subcommittee on Health 

House of Representatives 

June 12, 2013 

In a study we recently published in the June edition of the journal Health Affairs. Christine Eibner 

- an economist at RAND - and I used the RAND COMPARE microsimulation model to estimate 

the likely effects if 14 states choose not to expand Medicaid under federal health care reform. 

Among the measures studied were the impacts of Medicaid expansion on insurance coverage, 

federal payments into the states and state spending on care for the uninsured. 

The states studied were Alabama, Georgia. Idaho, Iowa. Louisiana, Maine, Mississippi, North 

Carolina, Oklahoma, Pennsylvania. South Carolina. South Dakota. Texas and Wisconsin. 

Although governors in additional states oppose expanding Medicaid. the 14 states in the study 

were the first whose governors said they would not expand Medicaid. At the time of the analysis, 

these were seen as the least likely to expand Medicaid. 

We found that states that choose not to expand Medicaid under federal health care reform will 

leave millions of their residents without health insurance and increase spending, at least in the 

short term, on the cost of treating uninsured residents. 

If 14 states decide not to expand Medicaid under the Affordable Care Act as intended by their 

governors, our analysis found that those state governments collectively will spend $1 billion more 

on uncompensated care in 2016 than they would if Medicaid is expanded. 

In addition. those 14 state governments would forgo $8.4 billion annually in federal payments and 

an additional 3.6 million people will be left uninsured. 

Our analysis showed it is in the best economic interests of states to expand Medicaid under the 

1 The opinions and conclusions expressed in this testimony are the author's alone and should not be 

interpreted as representing those of RAND or any of the sponsors of its research. This product is part of the 

RAND Corporation testimony series. RAND testimonies record testimony presented by RAND associates to 

federal, state. or loeallegislative committees; government-appointed commissions and panels; and private 

review and oversight bodies. The RAND Corporation is a nonprofit research organization providing objective 

analysis and effective solutions that address the challenges facing the public and private sectors around the 

world. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors. 

2 This testimony is available for free download at http://www.rand.org/pubs/testimonies/CT393.html. 
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terms of the federal Affordable Care Act. States that do not expand Medicaid will not receive the 

full benefit of the savings that will result from providing less uncompensated care. 

Furthermore, these states will still be subject to the taxes, fees and other revenue provisions of 

the Affordable Care Act, without reaping the benefit of the additional federal spending which will 

costs those states economically. 

Last summer's U.S. Supreme Court ruling on the Affordable Care Act gave states the ability to 

block the law's expansion of Medicaid, the federal-state program that provides health insurance 

to low-income families. The Affordable Care Act provides support to expand Medicaid to include 

families that earn up to 138 percent of the federal poverty level. 

The federal government will pay a much larger share of costs for the Medicaid expansion than it 

does for current Medicaid enrollees. It will cover 100 percent of the costs for expanding Medicaid 

beginning in 2014 through 2016, and then gradually decrease support to 90 percent of costs 

beginning in 2020. The federal government currently pays an average of 57 percent of the cost of 

Medicaid. 

Our study found that the cost to states for expanding Medicaid generally would be lower than the 

expense state and local governments will face for providing uncompensated care to uninsured 

residents after implementation of the Affordable Care Act. 

We estimate that increased insurance coverage triggered by health reform will reduce state and 

local spending on uncompensated medical care by as much as $18.1 billion annually across all 

states. Those savings may continue beyond 2020, when the states' share of Medicaid costs 

plateaus. 

Our study suggests that changes could be made to the Affordable Care Act to help some people 

targeted by the Medicaid expansion to get health insurance coverage through other means. 

Those options include a smaller expansion of Medicaid or changes in the new state insurance 

exchanges to allow more poor people to purchase private health insurance. 

The study shows the alternatives could help provide health insurance to some people targeted by 

the Medicaid expansion. But none of the options examined would provide health coverage to as 

many people as full Medicaid expansion. 

We also outlined how failing to expand Medicaid could have more than financial consequences. 

2 
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Based on a 2012 study in the New England Journal of Medicine showing that past expansions of 

Medicaid have led to decreases in deaths, we estimate that an additional 19,000 deaths could 

occur annually if the 14 states studied do not expand Medicaid. 

Support for our study was provided by RAND's Investment in People and Ideas program, which 

combines philanthropic contributions from individuals, foundations, and private-sector firms with 

earnings from RAND's endowment and operations to support research on issues that reach 

beyond the scope of traditional client sponsorship. 

RAND Health is the nation's largest independent health policy research program, with a broad 

research portfolio that focuses on health care costs, quality and public health preparedness, 

among other topics. 

3 
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Medicaid Expansion and Mental Health Care 

Copyright May 2013, NAMI, the National Alliance on Mental Illness 

NAMI, the National Alliance on Mental Illness, is the nation's largest grassroots mental health organization dedicated 

to building better lives for the millions of Americans affected by mental iUne55. NAM! advocates for access to services, 

treatment, supports and research and is steadfast in its commitment to raising awareness and building a community of 

hope for all of those in need. 

Acknowledgements and Gratitude 

This report was prepared by staff of the National Alliance on Mental Illness (NAMI). The report's authors were Angela 

Kimball, Sita Diehl and Ron Honberg, with contributions from Darcy Gruttadaro, Katrina Gay, Laura Usher and Jessica 

Hart. NAMI is particularly grateful to the individuals who provided accounts of the impact of Medicaid on their lives or 

the lives of their toved ones. NAMl's advocacy and educational efforts are driven by the courage and perseverance of 

these individuals and many others like them. 

www.namLorg 

Helpline: (800) 950-NAMI (6264) 

Twitter: @NAMICommunicate 

www.facebook.com/officiaINAMI 

NAMI, 3803 N. Fairfax Dr., Suite 100, Arlington VA 22203 

Stock photos used in this publication are not meant to indicate any particular attitude or opinion on the port of those 

whose images are being used and are not intended to indicate an endorsement by the Subjects. 
66 


85441.026

Medicaid Expansion and Mental Health Care 

Introduction 

The tragic shooting in Newtown, Connecticut and 

others have stimulated public discussion about 

the failed mental health system in America. After 

cuts of nearly S4.35 billion to public mental 

health programs from 2009-2012', mental 

health services simply are not available to many 

Americans who need help. With fewer than half 

of Americans who live with mental illness getting 

any treatment2

, concern is growing about lack 

of access to mental health services. People are 

asking, "Where can! get mental health services 

if ! don't have health insurance and can't afford 

care?" 

As of the date of publication of this report, 

only 20 states and the District of Columbia 

have committed to expanding their Medicaid 

programs. The facts are clear - six out of ten 

Americans living with serious mental illness 

have no access to mental health care at all 

Glaring gaps in treatment of this kind would 

not be tolerated for heart disease, cancer or 

diabetes and they should not be tolerated 

for mental illness either. States that decline 

to expand Medicaid will miss as good an 

opportunity as they may ever have to address 

this shameful void in access to mental health 

treatment. See AppendixV to check the status 

of Medicaid expansion in your state. 

Hoping to improve access, some lawmakers are 

pledging to invest in mental health care. One 

significant step that states can take is to extend 

Medicaid to 138 percent of the Federal Poverty 

Level (FPL), an option available to states as 

a result of the health reform law, the Patient 

Protection and Affordable Care Act (ACA). 

Medicaid is the most important source of 

financing for menta! health services in America 

today, offering mental health services that would 

otherwise be out of reach for low-income people 

affected by mental lUness. Medicaid's role in 

mental health care has increased, and today the 

federal/state health financing program pays for 

nearly half of all publicly-funded mental health 

services. 

Expanding Medicaid will fill critical gaps 

in access to health and mental health 

care, reduce uncompensated crisis 

care and pave the way to recovery and 

economic self-sufficiency for millions of 

Americans. 

A broad array of vital mental health services and 

supports are covered by Medicaid. For many, like 

Sharon's son, Medicaid mental health services are 

life-changing: 

/-lcnol 

iW5bc;;:W1i(l full< 

illd~ ill hnl)j\ thUI/herl' l~ 

A Snapshot of l-1edicaid Mental Health 

Benefits 

Medicaid is a life-saving program that provides 

health and mental health care to low-income 

children, pregnant women, families, people 65 

or older, and certain people with disabilities. 

Medicaid is particularly important for children and 

adults with mental illness, offering vital services 

and supports that are typically not covered by 

private insurance. 

Medicaid is the most important source of funding 

for mental health services. In 2008, 46 percent of 

state controlled funds for mental health services 

came from Medicaid. 
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taboratory 

children 
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are the third most common 

reason children and adults to 

hospftalizeci.8 
69 


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70 


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meet "benchmark" or "benchmark equivalent" 

standards that are modeled after private 

insurance plans. Medicaid expansion plans 

modeled on private insurance may limit 

coverage to traditional medical services such 

as inpatient treatment, outpatient counseling 

and medications. Services such as Assertive 

Community Treatment (ACT), psychiatric 

rehabilitation and housing supports, which are 

covered in many existing Medicaid programs, 

may not be covered.18 

!~f"J'-:[ Policy Recomt:1S'r:c2.,lc:1 

Cover evidence-based mental health services 

in Medicaid expansion plans. Evidence-based 

mental health treatment and services have 

been identified with proven effectiveness in 

fostering recovery and preventing relapse. These 

include ACT, cognitive behavioral therapy (CBT), 

integrated treatment for mental illness and 

substance use disorders as well as others~ These 

effective interventions are frequently covered 

by traditional (existing) Medicaid programs and 

should be covered in Medicaid expansion plans 

and in policies offered through state health 

insurance marketplaces. 

NAMI calls upon the U.S. Department of Health 

and Human Services (HHS) to define a single 

comprehensive Essential Health Benefit in 2016 

that ensures that an appropriate range of specific 

services are covered in every plan. 

Exemptions for "medically frail" individuals, 

including adults with serious mental 

illness and children with serious emotional 

disturbances. The ACA specifies that individuals 

who are "medically frait" or have "special 

medical needs" are exempt from mandatory 

enroUment in more limited Medicaid expansion 

plans. This includes "adults with serious mental 

illness" and "children with serious emotional 

disturbances:' 

Medically frail individuals, including those with 

mental illnesses, must be provided with the full 

benefits available in traditional Medicaid programs 

at the enhanced federal Medicaid matching rates 

deSignated in the Affordable Care Act. 

The "welcome mat" effect. When the ACA goes 

into effect in the states in 2014, it is expected 

that significant numbers of people will be 

identified who are already eligible for Medicaid 

but have never enrolled, Some states have raised 

concerns about this "welcome mat effect" (also 

referred to as the "woodwork effect") for fear 

that they will incur higher financial burdens. In 

fact, enrolling these individuals in Medicaid will 

have long term benefits associated with timely 

treatment and reduced medical or psychiatric 

emergencies. 

Outreach and enrollment. In states that expand 

their Medicaid programs, millions of uninsured 

individuals, induding many Hving with mental 

illness, could be added to the Medicaid rolls. 

Enrolling all who are potentially eligible will 

present a formidable challenge, particularly for 

populations that are traditionally hard to reach. 

These populations include persons living with 

mental illness who are homeless, hospitalized, 

incarcerated or otherwise limited in access to 

information and services. 

NAt"i! Recommend2tion 

Implement strategies to enroll hard to reach 

individuals living with mental illness in Medicaid 

expansion plans. The Centers for Medicare and 

Medicaid Services (CMS) recently announced 

the availability of $56 million to support 

navigators to help provide information to 

health care consumers about options available 

through state health insurance marketplaces, 

Medicaid and Children's Health Insurance (CHIP) 

programs. NAMI urges CMS to award navigator 

contracts to mental health agencies or advocacy 

organizations to conduct education, outreach 

and enrollment of hard to reach children, youth 

and adults with mental illness, including those 

who are in hospitals, homeless or involved with 

criminal justice systems. 

State compliance with the EPSDT mandate. 

States are required under Medicaid law to 

provide Early, Periodic, Screening, Diagnosis and 

Treatment (EPSDT) for all children and youth 

enrolled in the Medicaid program. The EPSDT 
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mandate requires mental health screening for 

all Medicaid enrolled children and youth. If 

the screening shows signs of emerging mental 

illness, a further assessment must be provided 

along with all medically necessary mental health 

services and supports needed to effectively treat 

the mental illness. The early detection of mental 

illness and substance use disorders is important 

in the overall health of a child and helps to 

reduce and eliminate the long~term effects of 

these conditions. However, only a smaU number 

of states fully comply with the EPSDT mandate. 

PoUcy Recomms-nca,;:'n 

Monitor states and provide guidance to ensure 

full compliance with the EPSOT mandate. 

Significant national attention has focused on 

the need for the early identification of emerging 

mental illness and early intervention. Guidance 

and technical assistance are needed from eMS 

to help states understand the scope of the 

EPSDT mandate, especially when it comes to 

mental health screening and the broad array of 

mental health services and supports that must 

be provided. CMS has issued some guidance to 

states, but far more is needed to help states 

understand how to create effective mental health 

screening programs. CMS should also monitor 

states to ensure that they are in full compliance 

with the broad EPSOT mandate. 

Mental health and addictions parity. The Paul 

WeUstone and Pete Domenici Menta! Health 

Parity and Addictions Equity Act of 2008 

requires insurance plans that offer coverage for 

mental illness and substance use disorders to 

provide these benefits in a no more restrictive 

way than aU other medical and surgical benefits. 

The ACA extended these requirements to aU 

individuals and smaU employer health insurance 

plans offered through state health insurance 

exchanges as well as non-managed care 

Medicaid expansion plans. Final regulations 

defining the specific scope of mental health and 

addictions parity requirements have not yet been 

issued but are expected to be released before 

the end of 2013. 

The Medicaid IMO exclusion. When the 

Medicaid program was first created in 1955, 

the federal law contained a provision excluding 

coverage of treatment in freestanding psychiatric 

hospitals known as Institutions for Mental 

Diseases (lMDs). The policy was driven both by 

ideology, specifically the desire to incent/vize 

community mental health treatment, and 

economics. Today, the IMD exclusion in Medicaid 

remains in effect and is one factor contributing 

to lack of inpatient beds for acute or emergency 

psychiatric treatment. The ACA authorized 

funding for Medicaid Emergency Psychiatric 

Demonstrations, a pilot project evaluating 

whether Medicaid "can support higher quality 

care at a lower cost" by reimbursing private 

psychiatric hospitals for acute psychiatric 

inpatient services. Grants have been awarded 

to 11 states and the District of Columbia to 

implement the demonstration projects.19 

N~Y,! Policy ReCOI'lmencatio"l 

Abolish the IMO exclusion. Preventing Medicaid 

reimbursement for psychiatric treatment of 

individuals between the ages of 22 and 64 in 

IMOs is outmoded and discriminates against 

people who require inpatient psychiatric care. 

It is time for Congress to eliminate the IMO 

exclusion and allow Medicaid dollars to be used 

for a range of effective mentaL health services, 

including inpatient treatment when needed. 

Medicaid Health Homes. The ACA created an 

option for states to establish Health Homes to 

better coordinate care for people with chronic 

conditions, induding serious mental illness. 

Health Homes are not physical structures but 

are rather mechanisms for integrating primary 

and specialty care in a coordinated fashion 

for people with chronic lHnesses. States are 

afforded flexibility in how they design these 

systems and receive an enhanced 90 percent 

Innovation, "Medicaid Emergency Psychiatric Demonstration," http://innovatlon.cms.goV/initilltives/medlcaid-emergency-
72 


85441.032

federal Medicaid match for the first two years 

of implementation.20 A number of states have 

implemented or are considering implementing 

Health Homes, with particular focus on serving 

individuals with serious mental iUness.21 

A new wave of privatization in Medicaid 

Privatization of Medicaid is not a new concept. It 

dates back to the 1990s with the trend toward 

Medicaid managed care, but several states are 

considering new privatization arrangements 

as a way to implement Medicaid expansion. 

Specifically, some states are considering an 

approach called premium assistance, in which 

Medicaid funds are used to purchase private 

health insurance. To qualify, these plans 

must offer a set of benefits equivalent to the 

benchmark Medicaid expansion ptan established 

in the state and must not cost beneficiaries any 

more in copays than they would owe under a 

more traditional Medicaid approach. 

COliclt..:sion 

Medicaid is fundamental to mental health care in 

America. Medicaid coverage allows mental iUness to 

be treated early, before symptoms worsen. Services 

available through Medicaid, and sometimes nowhere 

else, enable people who have been disabled by 

mental illness to rebuild their lives. When untreated, 

the human and fiscal impact of mental illness 

is felt. It is felt not only in uncompensated care 

costs for emergency room visits and psychiatriC 

hospitalization, but also in school failure, reduced 

productivity, increased incarceration, hometessness 

and lost lives. By contrast. Medicaid coverage helps 

people with mental illness get services, stay healthy 

and contribute to the vitality of their communities. 

In the aftermath of Newtown, many politicians and 

policy makers have promised to take steps to fix 

America's broken mental health system. Expanding 

Medicaid in all states would represent a significant 

step towards keeping those promises. For people 

living with mental illness, Medicaid expansion, 

induding adequate coverage and aggressive 

enrollment strategies, can make the difference 

between dependency and independence, between 

misery and dignity. Now is the time to deliver on 

these promises. 

"/ have severe mental illness which requires 

ongoing therapy and medication. Without Medicaid, 

I would not be able to come dose to affording my 

monthly cost of these much needed services. I am 

thankful for Medicaid and hope others have access 

to quality mental health services as well." - Nikkol 
73 


85441.033

Appendix 

Massachusetts 

Michigan 

MltmesQta ,49 

Montana 

NBhraska $3,063 

Nevada $5,620 $210 

$15,366 $296 

New York $426 

North CarOlina $3'9,638 

North Dakota $2.357 

Ohio 

Oklahoma $8,561 $205 

$37,842 

.2,93$ 551 

South Carolina $543 

Tennessee 

Texas $65,619 

tHan $5,274 

$8,744 

Wyoming $1,353 $28 

United Stat~s $800,245 $18,308 
74 


85441.034

Appendix II 9 

42,312 

9,886 

33,340 

19,OS3 

59,043 

68,544 

72,038 

20,4% 83,312 

28,033 

\krmvnt 

27,.,13 

42,287 

2,744,582 
75 


85441.035
76 


85441.036

Appendix III 11 

55% FPl 

100% FPl 

Idaho 

59,010 

:lowa 

6,291 

LouisIana 29,660 

Maryland 4,106 

Massadlusetts 

20,373 

Montana 8.9% 

Nevada 8,428 

5.9% 19,670 

7,330 

New York 31,541 

North CaroUna 26,013 

North Dakota 

Ohio 

Oklahoma 24,381 

Oregon 27.109 

30,893 

43,155 

Tennessee 32,263 

129,820 

utah 11,738 

39695 

17,863 

10.8% 13,543 

14.6% 3,525 

1,285,313 
77 


85441.037

12 
78 


85441.038

Appendix IV 

California 

Colorado 

Connectltut 

Delaware 

District of Columbia 

florRia, 

Georgia 

, Hawaii 

Idaho 

lUinofs 

Indiana 

Iowa 

Kansas 

~.nfu&y 

louisiana 

'Maine' 

Maryland 

Massachuse~ '; 

MIChigan 

-Minnesota 

Mississippi MissourI ' Montana 

NebrasKa 

Nevada 

NE!~,'Harhpsh.lie 

New Jersey 

New Mexko 

NewYotk 

North Carolina 

North Dakota 

, Ohlo 

Oklahoma 

'Oregon 

Pennsylvania 

Rhode, Island 

South Carolina 

S~uth\ Pako~a' 

Tennessee 

TeRas, 

Utah 

Vermont 

Virginia 

waShington 

West Virginia 

Wlscons!n 

Wyoming 

13 
79 


85441.039

Appendix II 14 

Wyoming No 

_I_I_UIII_IIIIIIII' 

• Data derived from VestaL C. (2013, May 20). Medicaid ExpansIOn by the Numbers Slatelm€' http://mfo,pewtrusts.org!,slte/R?I'''H-gJtTalArWoXJqCQmzK9Q 
80 


85441.040

SIgn In nowif you're a subscrlbsr. . . .. _-_ .. ---

FuePrel/klw PRINT! E.f,\AlL I DOWNLOADCITAlION! PERMISSIONS 

The Oregon Experiment - Effects of Medicaid on Clinical 

Outcomes 

\(Rlherlne BliiCMr, Fh.D" $amp L, Taubimn, &:.0., I-klldi L. Ahrt. Ph,P., Mrn 6crnsteh !1l,D., Jonathan H. Gruber, JZ't1,D .. 

Josepl1 p, Newhoosa, RD., Ene C. Schneider, MD., BIlI,j, Wright, A).D., Ailln M Zaslavsky, FhD., anti Amy It 

1'lrlImbii)i'!. A1.D. forttle Oregon Haalth Study Group 

"I Eng!JMx!20':'I; 3SS"713-1122!May 2, 20131 DOl: jO.1C56I~ai212321 

BACKGROUND 

Despite the ifl1mlnent expans:on of Medicaid OO\lEll'ag& for !ow-Income 

adutts,~!le effects ofsxpartding cowrago are unclnar, Tho 2{lOO 

Medicaid ilxpanskll1 In Oregon based on lottery dl'a'Mngs from a 

waiting I:st proloiQed an opportunity to evaluate these effects. 

METHODS 

Approximately 2 years after the lottery. we obtained data from 63B7 

adults who were randomly salected to be able to apply for Medicald 

CO'.1erage and 5842 adults Who were not selected, Measures imlluJed 

blood-pressura, cholesterol, and glycatad hamoglobln le~ls; 

screening fcf depression; medi¢atlon inventories; and self..reported 

diagnoses, health status, health care utHizallon, and aut-of-pocket 

spending for such sftNces, We used the random assignment in the 

IoUilry to calculate the effect of Medicald co-.erage. 

RESULTS 

We four,d no slgnincant eli3cl of Medicaid cowrage on the prewlence 

Of dlagnosis of hypertension Of high cholesterollew!s or on the use of 

medication fur these conditions. Medicaid CO\eI'age sl~!ficamly 

increased the probability of a diagnOSIS of diobctes and the usa (If 

diabetes medication. but W$ obsMed no significant effect Of! a'.Ol'age 

g1ycated hemoglcb\n !iJ,\l:l!s or on the percentage of part[clparts with 

lelklls of 6.5% or higher. Medicaid co\erage. decreased the probability 

of a positJ\e screenIng for <lepression (-9,15 p6roantage points; 95% 

cO'1fldence fnleMll, -16.70 to -1,6(); P"'O,02), Increasedlhe use of 

many pr~iltlV1:l seflo!css, and nearly eliminated catastrophic oo!-of· 

pocket medical expendllutes. 

CONCLUSIONS 

This randomized, controlled study showed that Medicaid cO\erag.:l 

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ARTICLtACnvrrv 

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WIrIlsmTl& GooM i n.,tf"w, $llbroJjba or Groat& A(lCOUl't I Sign 1"1 i 

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•• SOfREE'i.ewlJfromIheNEJMArtlIiYe 
81 


85441.041

generated no significant l'llprowments In f;'lElasured physical health 

outcomes In the first 2 years, but it did incroose l)se of health care 

ser"IAces, raise rates of diabetes detecliOrl and management, 10INeI' 

rates Of depresslo1, and reduCG financial strain. 

TIrofindingsandconclusiollllexprossedlnthisarflciearellol&iyttl08eof\ha 

;rulhoroandool'lotnaoossa<'iyrcprosentll'evi(lWsofthaftl'lders. 

St;pporl!\d by grMt6 fromtha Offlce of ItIa ASA;lstant secretary for Ranl'li1g and 

EvallJab,OeparIl'oontofHootlhandftllmllServInes;ItwCallfo'l1laP>&lItl1Cnre 

Foundatiof': the John O. ar'td Catherill11 T, MacArthur Foundation; Ihe National 

l'1$tiwte on Aging (fOOAGO{2810, RQAG036631, and R01A0(345151); the 

Rober! Wood JohooOl1 Foun::latlcn; 1M Air-roo p, SIrJan Foundatkm, Ihe Snith 

RicharcsOl1 Foundation; and tho Social 8scmity Adn'II1lslmlion (5 Me 06096400.. 

03-OO,tolheNaUona:Bureauot~ResMrchospartofthElRe~rement 

Researoh Ooosortit.:mof 1he Socia: Socurity Adoinlst-"Slton), lind by the Caf\lat$ 10( 

t.'edlcaraalldMe<lc"*1Servlcoo. 

Oisclasl:relcnnspro'JldedbylheaJ.lthorsa'1!a\{alat;iewlth!he~ultext()fth!s 

artIcl& el NruM.org. 

We thsnk Chris AfeoOOli$, Josh Angrlst, Jook FcrwlGt. Guklo trbims, Larry Kall, 

Ja'f Klr!g, Koc looga, Stacy lindau, Jl:Ins Ludwig, ThomIs M:::~ Ben (J!koo, 

and the wamfrom\l1e National Center for Haakh b'lBtstic;s for helPful OOITiffirlts and 

ad\lica, Brandl (:(laWs, Sara KWalinlck. Zirui Song, Nlvedlilha Subramminn, arlO 

AnnettaZhou for rese!lrch a5sistHnea; rn.rfield staf' f()f par!kjpanl rl'!endtmant 

and daw oolletlbl1; and themlf'llefous O;-agonstalo 8ITp;OyOOl\ whO hoalpOO us 

acquire re<:essary data and allllwe."()<: our many questions aboullM 

adom\stral\Dnofstalaprograrro 

SOURCE INFORMATION 

From the Depat'trmnt of Health f'b$cy and M:nagermnt, Harvard Schoo! of Pubic 

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sehool{~.F.N., E.C.$" A,MZ.), e'ld RANJCotpof'lltJoo(EG.S.)-a~ in Boskln;1he 

1\atioosl Bureau (I &;onomc Research (K.6,. 5.i...T., M.8" J.H.G., J.P.N., A,N.F.), 

the Harvatd KOflI)I;}(jy SchooI{J.P;I>l), and lhe ~nartntmt of &;ooorrics, 

/lr1a~a\:husells !ns1!lUte of Technology {J.HG., A.N,I'.;-sim Ca!rOridge, M>\; 

Oolorrtla lklillersiy School of SOeial'NOrk. NDw Yo'll {>I.L.A.): and 1M<! Centerfo~ 

Outcorms fi<o:laarch ood !$.lea!!on, R'ovldcoolJ Po.-tfMd MsdiCa, Canter, Portland, 

OR(!l.J.W.l. 

AddrllSll r<Wrl~1 f<X!>Jests to Dr. Dalcker at lha Deparlm911 of t-ha!lh PoHt.y and 

Mar!afelmnt, Harvard School of I\!blc Health, 877 I-lmtilgICFIAve., Boslon, MA 

02115,oratkbalokli!ir@\1sph,h(lrvardoou. 

~ (If IlioOregoni'loollhSludy GrO'Jpar6iislsdblheSuppioororllary 

App<'..JKix. available alNElJ.org. 

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82 


85441.042

\1>. Sccmu Verma, MPH 

SVC, Inc. 

4XS Boldcrwoou Lane 

Carmel, IN 4li032 

Dear Ms. Verma: 

Thank you fbI' 

lC,lify at the hearing 

Jul\' 3, 2m3 

hd,m: the SubcI)lllllliHce on Health lm Wednesday. June 11,2013, to 

Need Illr \'1edkaid Rc'f,mn: ;\ Slate Perspective." 

l'ursuanlto the Rules of the Committee on Energy and Commerce. the hearing record remains 

open !l)l'ten husiness days to pennit Memhers ((l submit additional questions I"r the record. which arc 

attached. The fonDa! OfYOlIf rcspllllses to these should btl as follows: (1) the name orthe 

)l.lcillber whose question yon are addressing. (2) complete text oCthe questioll ),ou lire addressing in 

hold, and (3) your answer to that question in plainle~l. 

To facilitate the priming orlhe bearing record. please f(,'spond tel these questions by the close of 

business on Friday, July 19. 20B. Your responses should be mailed 10 Sydne Harwick, Legislative 

Clerk, COlllmittee Oil Energy and Commerce, 2125 Rayburn llouse OHlee Building, \Vashingtol1, D.C. 

20515 ,mel e-mailcd in Word format to Svdne.Harwi~k((l'lllaith()us".g()". 

Thank you again for your lime Ilnd cflorl preparing and dcliwring testimony before the 

Subcommittee. 

cc: The IlonorabJc Frank Pallone . .IL. Ranking Member, Subcommittee on llcalth 

Anadllllcnt 
83 


85441.043

Need for Medicaid Reform: A Perspective 

Responses to Committee 011 Ellergy & Commerce -Subcommittee 011 Health 

Prepared By Seel71a Verma 

STC, fllc. 

The Honorable Joseph R. Pitts 

1. Most states have implemented Medicaid managed care to some degree, but there remain 

certain areas of the program that do not have much managed care penetration, such as longterm care and behavioral health. Obviously, there are valid concerns about these especially 

vulnerable populations, but as Medicaid costs continue to balloon, do you see a need for more 

managed care in these areas? If so, what kind of rules, if any, should the Congress or the 

Administration give states with regard to Medicaid managed long-term care and/or 

behavioral health? Are there particular state programs that serve as an effective model for 

how to implement managed care in these areas of Medicaid? 

Medicaid managed care is an effective tool to achieve a variety of quality goals such as 

improved coordination of care and reduction in duplication of services. Managed care has also 

been utilized by states because it can provide budget certainty and assure adherence to specific 

goals and quality measures that may not exist in state run programs. Managed care can drive 

quality improvements due to introducing competition into the marketplace allowing health 

plans (MCOs) to compete for members by providing the best quality services at the most costeffective price for the state. Managed care also allows the state to leverage private market 

innovation and introduce best practices to the Medicaid population. These innovations need to 

be paired with safeguards to assure that beneficiaries are appropriately served, quality is 

maintained, and utilization management efforts are not burdensome to providers. In managed 

care, the state retains control and has the ability to sanction or terminate MCOs that are not up 

to par with state standards giving even further focus on quality outcomes and compliance. 

These strategies can be successfully implemented by states to manage behavioral health and 

long term services and supports and should be encouraged. States have been increasingly 

turning to Medicaid managed long-term services and supports (Ml TSS) with 26 states projected 

to have such a program by 2014.' Program design varies significantly across states with different 

approaches such as which populations are included, whether enrollment is mandatory and what 

services are covered under the managed care arrangement. 

1 Truven. (2012). The Growth of Managed Long-Term Services and Supports (MLTSS) Programs: A 2012 Update. 

Retrieved online: http://www.medicaid.gov/Medicaid-CHIP-Program-lnformationIBy-Topics/DeliverySystems/Downloads/MLTSSP White paper combined. pdf 

1 
84 


85441.044

The variation of program design across states is due in part to the current delivery system, 

funding mechanisms and political factors which vary across states. For example, Ml TSS target 

populations are receiving services from a variety of providers and agencies; there may be 

mUltiple entities, providers and case managers engaged in managing care. Additionally, these 

services and provider types have complex funding mechanisms which vary by state and 

influence what services are carved-out, what populations are enrolled, how rates are set and 

how services are coordinated. Provider availability and the urban versus rural make-up of the 

state are also key factors in considering managed care. Due to the complexities and variation 

across states, the federal government must ensure rules are flexible and allow states options to 

develop programs which are aligned with the unique characteristics of their state, delivery 

system and financing models. 

There are many examples of successful managed care programs, and there are key 

characteristics of an effective program that should be encouraged in all models. This includes 

reimbursement and payment structures that require adherence to quality and operational 

metrics and penalties for non-compliance. Contracts that include pay-for-performance, shared 

savings or capitation withholds and bonuses are also effective tools to assure quality. 

Additionally, where appropriate based on enrollee needs, program design should facilitate the 

use of home and community based services over reliance on institutional services. Program 

design should also facilitate comprehensive and integrated care to reduce the fragmentation of 

service delivery with sufficient flexibility to respond to unique enrollee needs. 

The federal authority to operate an Ml TSS program is very complex and can include a 

combination of waivers and Medicaid State Plan amendments. Typically the state is required to 

select an authority for managed care such as a Section 1115, 1915(b) or 1915(a) waiver as well 

as an authority for the long term services and supports such as Section 1915(c), 1915(i) or 

19150). The selection of the operating authority is based on the program design and policy 

options selected by the state. This creates a lengthy and cumbersome approval process. 

Reform efforts should include allowing maximum state flexibility with a streamlined federal 

approval process. 

Additionally, states must be given more flexibility to operate these programs. For example, 

there are complex Medicaid managed care regulations regarding populations which may be 

mandatorily enrolled, limits placed on cost-sharing and requirements on the number of plans 

that must be offered. Additionally, disabled children and duals are exempt from mandatory 

enrollment. States may seek waivers for these requirements, but as previously discussed this 

poses a significant burden. Each state has unique characteristics and must be given the flexibility 

to implement managed care accordingly, taking into account considerations such as rural versus 

urban issues and the prevalence of managed care entities within the state. 

Finally, Medicaid managed care strategies should be hinged on quality outcomes. It would be 

helpful for CMS to provide technical assistance by identifying potential measures of quality 

2 
85 


85441.045

related specifically to MLTSS from which states can select measures identified as most 

appropriate for their program. 

2. Much news has been made in recent months about using Medicaid dollars to enroll 

individuals in private coverage through the state exchanges. What federal barriers exist for 

states to exercise this option, and what unanswered questions do states have with regard to 

premium assistance? 

States looking to use a premium assistance option to cover individuals eligible for Medicaid 

under the expansion may implement premium assistance either as a Medicaid State Plan option 

or through an 1115 waiver application. While a few federal barriers and outstanding questions 

are relevant to both options some requirements are unique to either the Medicaid State Plan 

premium assistance option or the 1115 waiver option. 

Table 1: Federal Requirements to Premium Assistance Options for Individual Market Coverage 

i Requirements 

. State must allow choice between premium 

i assistance and traditional Medicaid coverage r'c0~~M"M'M"'''' '" ""'~""nM,' , , '_~""",_,,"0,","" " "'~"''''''~V''''''''., ., e, ,"'~~=·,~.m"#,,,,·,, 

Burdensome and administratively complex 

application, reporting, and evaluation 

•.. regu.!!:!~ents .... ~~ ................ ~. 

Opti~'! .. ~~.'l.lI\llIJ.~abl,,:.~~~ollgh .. 201~ .• 

Wrap aroun~2.ervicesal1~.!.l~.fI1.E!.nts 

Coor~il1atiol1~t.hquaE!iE!.!~E!iII!h.plllll.s .. 

Medically Frail 

State Plan 

x 

1115 

Demonstration 

Premium 

Medicaid Expansion through Premium Assistance as a State Plan Option: Under the Medicaid 

State Plan premium assistance option to implement premium assistance for individual market 

health insurance, whether purchased inside or outside of an Exchange, enrollees must be 

offered a choice of the premium assistance option for a commercial market plan or coverage 

through Medicaid. Options implemented through the Medicaid State Plan are not subject to the 

same burdensome 1115 Waiver reporting and administration requirements; however, the 

federal requirement to offer individuals eligible for premium assistance through the individual 

market premium assistance a choice between the commercial market option and Medicaid 

effectively requires that the implementation of two programs, a premium assistance Medicaid 

expansion and a traditional Medicaid expansion. 

3 
86 


85441.046

Medicaid Expansion through Premium Assistance as an 1115 Demonstration Wavier Option: 

Under the 1115 demonstration waiver option a state may apply for a waiver to implement a 

premium assistance program for coverage in qualified health plans on the state Exchange, 

Through the waiver, a state may require eligible individuals to enroll into premium assistance for 

commercial market coverage provided that enrollees have the option of at least two commercial 

health plans, States apply to the Centers for Medicare and Medicaid Services (CMS) to receive 

1115 demonstrations, and as a condition of the receipt of these demonstrations compile 

quarterly and annual reports for CMS, maintain a waiver program that is budget neutral, and 

conduct or contract for evaluations of the effectiveness of the innovations of the 

demonstration, Along with CMS, states have interest in understanding the effectiveness of their 

demonstrations and, in general, being able to identify what is working and what is not working 

and targeting areas for improvement are of key importance to all program administrators, 

However, the 1115 process from the initial application, to the negotiations with CMS, through 

program administration and reporting, can be a tremendous effort for state Medicaid agencies, 

Of key concern, is that in addition to the challenges of these requirements, guidance released in 

relationship to premium assistance demonstrations indicates that only a limited number of 

these demonstrations will be approved by CMS, that premium assistance demonstrations that 

are targeted to individuals with income between 100% of federal poverty level (FPL) and 133% 

of FPL 2 will be more likely to be approved, and that these demonstrations will only be approved 

through 2016, as states are eligible for innovation waivers beginning in 2017,3 

Concerns With Premium Assistance Options: Under both Medicaid State Plan and 1115 

Demonstration options for implementing Medicaid Expansions through premium assistance in 

the individual market, states must consider how they will address the restrictive federal cost 

sharing requirements, the requirement to provide wrap around coverage for Medicaid services 

that are not provided on the commercial market plan, determinations of cost-effectiveness, 

coordination with qualified health plans including receiving data for quality reporting, impacts to 

the qualified health plans on risk adjustment, reinsurance, and risk corridors, and requirements 

around medically frail individuals, 

Cost sharing requirements 

For premium assistance on the Medicaid State Plan, cost sharing may be no more burdensome 

for the enrollee than it would be under the Medicaid State Plan, While state Medicaid cost 

sharing amounts vary, the maximum amounts states may apply vary by FPllevel and service 

description, 

2 In 2013, 100% of FPL is $11,490 annually for an individual and $23,550 annually for a family of four; 133% of FPL 

is $15,282 annually for an individual and $31,322 annually for a family of four, 

3 http://medicaid,gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance,pdf 

S (' 

4 
87 


85441.047

Table 2: eMS Allowable Cost Sharing by FPl42 CFR PART 447 

Inpatient stay 

One of the key issues surrounding Medicaid expansion through premium assistance is the 

requirement that the commercial market health plans charge cost sharing that is no more than 

the limits under Medicaid. As commercial market health plans are developed to serve 

commercial market populations and not Medicaid plans, their cost sharing amounts are 

different than the Medicaid cost sharing amounts, and there is no 'Medicaid' cost sharing 

variation implemented for plans offered on the Exchange. Thus, implementing any cost sharing 

for participants under a premium assistance Medicaid expansion in a manner foreseen by CMS 

presents a challenge for states. Since cost sharing will be different than the CMS allowed 

amounts on the commercial individual market health plans, states have the options of (1) 

covering all member cost sharing, and charging cost sharing amounts to members on the back 

end after examination of claims data or (2) not requiring cost sharing for individuals in premium 

assistance. The first option is not only operationally difficult for states but also would result in 

individuals paying a ropayment or coinsurance amount with a significant time-lag; this time-lag 

will make it less likely that members will associate the payment of the cost sharing with the 

service received and thus works against the intent of cost sharing which is to promote 

awareness among enrollees of the cost of care. The second option discounts the ability of cost 

sharing to impact care seeking behavior and potentially creates inequities between populations 

covered on traditional Medicaid that may be subject to cost sharing and the expansion group 

covered through premium assistance. 

To make premium assistance demonstrations more attractive and more operationally feasible 

for states, federal policy needs to give states more flexibility in the area of cost sharing. There 

is a significant federal barrier in implementation of innovations around cost sharing under an 

1115 demonstration with states not being able to receive cost sharing waivers for these 

demonstrations, especially as applies to monthly premiums or enrollment fees for enrollees 

5 
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with income under 150% FPL. Cost sharing waivers that make the most sense in the context of a 

premium assistance demonstration are: (1) a waiver of all of the CMS allowable cost sharing 

amounts for the purpose of allowing the Exchange qualified health plans to charge Medicaid 

premium assistance enrollees the amounts charged to other enrollees of the same plan 

variation, limited to the enrollee's S% of income out-of-pocket maximum amount and (2) 

implementing individual monthly financial contributions or premiums limited to the enrollees 

maximum 5% of income out-of pocket amount that could be paid to the Medicaid agency or the 

qualified health plan and would assure that the enrollee is contributing towards their health. 

The first option assures that individuals on premium assistance demonstration are treated 

similarly to individuals with slightly higher incomes covered through Exchange plans and will 

reduce the learning curve for individuals that churn from Medicaid premium assistance to 

premium tax credits and cost sharing reductions on the Exchange while simultaneously assuring 

that Medicaid premium assistance enrollees are protected by the 5% of income out-of-pocket 

limit. The second option ensures that all enrollees are contributing to their health care without 

creating additional burdens on qualified health plans to comply with Medicaid cost sharing 

requirements, or requiring enrollee payment of cost sharing for services after an extensive timelag. In addition, a required monthly payment in place of the CMS allowable copayment and 

coinsurance schedule offers more predictable cost sharing for enrollees and required monthly 

payments may be more affordable for enrollees than the allowable CMS cost sharing amounts. 

Under this model states have the ability to implement innovative incentive programs that 

provide for the elimination or reduction of the required monthly cost sharing for the completion 

of targeted healthy behaviors. Monthly contributions may be a more beneficial and less 

burdensome implementation of cost sharing under a premium assistance Medicaid expansion 

for enrollees, states, and qualified health plans. 

Wrap Around Services and Payments 

For premium assistance Medicaid expansions implemented either through the Medicaid State 

Plan or through an 1115 demonstration waiver, CMS requires that states provide wrap around 

services to beneficiaries for benefits that are covered on the Medicaid State Plan but not on the 

commercial market qualified health plan. The services that may be required to be wrapped 

around include Early Periodic Screening, Diagnosis, and Testing (EPSDT) for individuals aged 19 

and 20, assurance of non-emergency transportation services, and potentially behavioral health 

services. Individuals enrolled on premium assistance through state Exchange qualified health 

plans are receiving coverage that is deemed adequate for all individuals that qualify for a 

premium tax credit or cost sharing reduction. Individuals receiving premium tax credits and cost 

sharing reductions are not a substantially different population than the Medicaid expansion 

population that may receive premium assistance. Requiring these wrap around services creates 

administrative difficulties for states as individuals enrolled in premium assistance through 

qualified health plans would also have to be issued a Medicaid member card to access wrap 

around services. The ACA indicated that Medicaid expansion populations should be provided 

benchmark or benchmark equivalent coverage based on section 1937 of the Social Security Act; 

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these coverage packages are in general more aligned with commercial coverage than Medicaid 

coverage. The requirement to wrap benefits for benchmark or benchmark equivalent coverage 

basically makes this coverage equal to Medicaid coverage instead of being aligned with 

commercial coverage. This requirement also serves as a disadvantage to participants and may 

be confUSing as they may remain in the same plan but will lose these benefits if their income 

increases and they become eligible for premium tax credits. In light of this and considering the 

similarity of the populations, especially the Medicaid expansion population with income from 

100% to 133% of FPL that would be eligible for premium tax credits and cost sharing reductions 

if a state did not expand Medicaid, the requirement to offer wrap around services should be 

reconsidered. 

In addition to the requirement to wrap around services, Medicaid programs that are interested 

in premium assistance expansions are required to wrap around payments to federally-qualified 

health centers. In Medicaid, these health centers are required to be paid based on the 

prospective payment system (PPS) which bases payment on the cost of providing services for 

the individual health center, not on the established Medicaid fee schedule. This policy assures 

that these essential community providers have sufficient funds to cover the cost of serving the 

low income populations. However, in the context of a premium assistance demonstration, this 

policy becomes redundant. Qualified health plans are required at 45 CFR §156.235{e) to pay 

federally-qualified health centers at least the Medicaid PPS rate or another mutually agreed 

upon rate that is not less than the PPS rate. When Medicaid enrollees are served through 

qualified health plans under premium assistance, any services they receive will already be paid 

at a minimum of the PPS rate, thus the requirement to wrap around payments to these health 

centers is an unnecessary. To streamline the process for states seeking premium assistance 

demonstrations, CMS should make clear that this requirement does not apply to individuals 

whose services at federally-qualified health centers are reimbursed by qualified health plans. 

Coordination with Qualified Health Plans 

Qualified health plans on state Exchanges that may be leveraged under a premium assistance 

expansion in an Exchange are required to meet quality, transparency, benefit, network 

adequacy and non-discrimination requirements. Qualified health plans may offer coverage to 

individuals that are eligible for premium tax credits and cost sharing reductions with income at 

or above 100% FPL. To assure that qualified health plans are willing and able to participate in 

Medicaid premium assistance demonstrations it is essential to minimize additional reporting or 

administrative requirements on these plans that are above and beyond what the qualified 

health plan would be required to report in the Exchange. It is currently unclear exactly what 

reporting will be required of qualified health plans serving Medicaid premium assistance 

recipients in an Exchange as CMS has not defined this; the guidance only indicates that 

'appropriate data' will be required: However, imposition of burdensome reporting 

'http://medicaid.gov!Federal-Policy-Guidance!Downloads!FAQ-03-29-13-Premium-Assistance.pdf 

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requirements on qualified health plans that enroll Medicaid premium assistance enrollees 

would serve as a federal barrier to implementation of a premium assistance demonstration as 

qualified health plans may decline to accept Medicaid premium assistance enrollees. 

Risk Adjustment, Reinsurance, and Risk Corridors 

Risk Adjustment, Reinsurance, and Risk Corridors are programs initiated by the ACA that aim to 

stabilize premium cost. Risk Adjustment is a permanent program that transfers money from 

health insurance plans with lower enrollee morbidity to health insurance plans with higher 

enrollee morbidity and applies to all individual and small group health plans inside and outside 

the Exchange. Reinsurance is a temporary program that collects funds from all self-insured and 

fully insured commercial health insurance plans and uses these funds to provide reinsurance for 

high cost claims to individual market health insurance plans. Risk Corridors is also a temporary 

program that protects against losses for individual health insurance plans in the Exchange. How 

these programs apply in the context of utilizing Medicaid to provide premium assistance in 

Exchanges has not been clarified. For example, will Reinsurance apply for the Medicaid 

population enrolled into qualified health plans or are Medicaid agencies required to provide a 

similar program for the qualified health plans for their enrollees? Is the Medicaid population 

eligible forthe Risk Corridor program and will they be included in the Risk Adjustment program? 

Will the federal government pay for costs related to these programs on behalf of States? For 

states interested in setting up premium assistance for Medicaid eligible individuals to enroll in 

state Exchanges these are key questions and without understanding the implications it may be 

difficult to attain the buy in of qualified health plans. 

Medically Frail 

All states implementing Medicaid expansions, whether through premium assistance or other 

methods, are required to come up with a definition for medically frail individuals and assure that 

these individuals are given a choice between Medicaid expansion coverage and coverage that 

offers all of the benefits available on the Medicaid State Plan. The importance of providing 

appropriate services and care coordination to individuals with serious or disabling health 

conditions is not questioned. Care that is not appropriate for individuals with serious and 

disabling health conditions can lead to increased cost and decreases in health outcomes. 

However, the CMS requirements around how states must treat populations considered 

'medically frail' make it more difficult for states to appropriately address the needs of these 

populations. 

While not mentioned in the ACA, in promulgating regulations for implementation of Medicaid 

expansions CMS updated the definition of medically frail individuals to make it more specific. In 

defining medically frail, based on the final regulations, 5 states must at least include individuals 

with: (1) a disabling mental disorder, (2) a chronic substance use disorders, (3) serious and 

5 42 CFR §440.315(f) 

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85441.051

complex medical conditions, (4) a physical, intellectual or developmental disability that 

significantly impairs their ability to perform one or more activities of daily living, or (5) 

individuals with a disability determination based on Social Security criteria or in States that apply 

more restrictive criteria than the Supplemental Security Income program, the Medicaid State 

Plan criteria. 

Individuals qualifying as medically frail may not be mandatorily enrolled into an alternative 

benefit plan that provides less than the Medicaid State Plan benefits states, including the 

alternative benefit plan that would cover individuals receiving premium assistance in state 

Exchanges. To meet this requirement, states have to develop processes to identify medically 

frail individuals at enrollment, and will likely have to develop at least two alternative benefit 

plans, one indexed to the Medicaid State Plan for medically frail individuals and one indexed to 

the commercial market essential health benefits for individuals receiving premium assistance. 

Policies should be explored on how to ensure appropriate care for medically frail individuals 

though qualified health plans and states should be allowed more flexibility in designing 

programs for the medically frail. The current policy of requiring a choice between benefits equal 

to the Medicaid State Plan and the benefits offered to non-medically frail individuals in a 

Medicaid expansion creates additional complexity for states and enrollees but does not assure 

the provision of appropriate services to this population. 

Cost- Effectiveness 

Implementing a Medicaid expansion through premium assistance in the individual market either 

through the Medicaid State Plan or through an 1115 demonstration waiver requires that the 

state show that the coverage on the individual market is cost-effective when compared with 

Medicaid expansion coverage. Traditionally, cost-effectiveness has required that the 

commercial market coverage is no more expensive than Medicaid coverage, inclusive of 

administrative costs and any wrap around services or cost sharing. However, due to higher 

provider reimbursements and administrative costs among state Exchange qualified health plans, 

total health care costs in a state Exchange plan may be 20% to 40% higher than in a Medicaid 

operated plan.' While covering Medicaid individuals through Exchange plans may have benefits 

beyond total cost including improved access to providers, improved outcomes related to 

individuals that churn between Medicaid and Exchange coverage, and greater efficiency overall 

in the Exchange due to the provision of coverage for more Exchange lives, it is unclear how to 

incorporate these concepts under a traditional Medicaid premium assistance cost-effectiveness 

model. 

For Medicaid premium assistance expansions implemented through 1115 demonstrations, 

alternative budget neutrality or cost effectiveness models have been developed that will allow 

states to include analysis of systematic impacts of premium assistance programs; however, what 

6 http://publications.milliman.com(publications/healthreform/pdfs/considerations-for-medicaid-expansion.pdf 

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the expectations will be for states regarding reporting and data analysis on cost-effectiveness if 

a demonstration premium assistance demonstration is approved remains unknown. In general, 

expectations around the budget neutrality process have been unclear for states seeking 1115 

waivers and for all demonstrations CMS needs to provide additional guidance on how the 

budget neutrality process works and what submissions are required to show budget neutrality. 

Outstanding Questions 

What cost-effectiveness methodology applies to the Medicaid State Plan premium assistance 

option? 

How will states that are conducting premium assistance demonstrations under 1115 authority, 

show they have met their cost-effectiveness/budget neutrality requirements over the course of 

the demonstration? 

What provisions around cost sharing may be waived under an 1115 premium assistance 

demonstration? 

What provisions regarding wrap around services may be waived under an 1115 premium 

assistance demonstration? 

How do the Risk Adjustment, Reinsurance, and Risk Corridors apply for qualified health plans 

that enroll individuals through Medicaid premium assistance? 

Recommendations 

The following actions would help to ameliorate some of the federal barriers to implementing 

Medicaid expansion premium assistance options. 

• Allow states to mandate enrollment into a Medicaid State Plan premium assistance option 

for the individual market as they can for premium assistance in the group market. 

• Streamline and make more transparent the 1115 application and approval process and the 

budget neutrality and cost-effectiveness requirements. 

• Allow states to review 1115 premium assistance demonstrations for the full demonstration 

period of 5 years, instead of limited to a coverage period through 2016. Innovation waivers 

will be available beginning in 2017, however, states will have to invest significant resources 

into the analysis and development of such waivers. 

• Allow for states to use monthly required contributions or premiums for individuals at all 

income levels, including those with incomes below 150% of FPL. 

• Allow states to use the qualified health plans standard cost sharing limited to 5% of income 

maximum out of pocket as an alternative to CMS allowable cost sharing under premium 

assistance demonstrations. 

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• Clarify the provisions that may be waived and those that may not. The granting of waivers is 

inconsistent at best. One state may receive a waiver of a certain provision and another 

state may be denied a waiver on the same provision. 

• Allow states to be exempt from the requirement to provide wrap around services for EPSDT 

and non-emergency transportation. 

• Clarify that wrap around payments to federally-qualified health centers are not required 

under a premium assistance option, as qualified health plans are already required to pay at 

least this rate. 

• Clarify reporting expectations for qualified health plans covering Medicaid participants 

under premium assistance options. 

• Clarify the policy around Risk Adjustment, Reinsurance, and Risk Corridors for qualified 

enrolling individuals through Medicaid premium assistance. 

Provide detail on how cost-effectiveness will be determined through a Medicaid State Plan 

option and how states will be required to demonstrate ongoing cost-effectiveness under an 

1115 premium assistance demonstration. 

The Honorable Michael Burgess 

1. In your testimony, you cite reduced provider reimbursement rates as a reason behind the 

decreasing number of primary care providers willing to accept Medicaid patients. 

How can the federal government ensure provider rates are set at levels that encourage 

provider buy-in? 

States have been forced to make the difficult decision to reduce provider reimbursement rates 

as there are few alternative models under the current regulatory structure available which can 

provide such short-term and immediate cost-savings. The ACA maintenance of effort (MOE) 

requires states to maintain eligibility levels. Additionally, there are not many optional benefits 

to cut. States must also be cautious to ensure that reductions in covered benefits do not lead to 

shifting care to more expensive settings. For example, cuts in primary care can lead to increased 

visits to the emergency department. 

States need better tools to manage costs. Any federal efforts to set rates must consider 

financing and should not be an unfunded mandate placed on states. Strategies designed to 

better manage care and in turn generate cost savings through improved coordination of care, 

increased efficiencies and reduction in duplication of services are difficult and lengthy to 

implement. Specifically, the State Plan Amendment and waiver review process for such 

program changes are onerous and delay states' ability to realize savings. By reducing the length 

of time required for these review processes, states would be better positioned to implement 

innovative management strategies likely to generate cost-savings. This would reduce states' 

tendency to utilize provider rate cuts as the first go-to strategy for cost-containment. 

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2. As one of the major architects of Indiana's Medicaid 1115 Waiver program, "Healthy Indiana", 

you helped the state implement a consumer-driven approach to Medicaid reform, enabling 

Medicaid beneficiaries to get a high-deductible health plan and a health savings account. 

How did this consumer-driven approach to Medicaid affect patient access to providers? 

The state legislation mandates that providers be paid at Medicare rates. One of the goals of 

requiring these rates (which are higher than those paid to providers for traditional Medicaid 

enrollees) is to ensure adequate provider network access for HIP members. HIP networks are 

assessed by State staff on a quarterly basis to ensure primary and specialist adequacy meets 

standards. If a provider is not available in network within program allowed distances (30 miles 

for primary and 60 miles for specialists), members are allowed to visit out-of-network providers. 

This ensures members receive needed care. During the first year of HIP MCOs worked diligently 

to build networks and continue these efforts on an ongoing basis. No significant gaps in 

network adequacy exist currently. 

Additionally, outcomes data indicates enrollees are appropriately accessing and utilizing 

services. Unlike traditional Medicaid, HIP decreases inappropriate ER usage. HIP enrollees pay 

copayments for inappropriate (non-emergent) ER use. During a 12 month enrollment period, 

HIP enrollees on average showed a 14.8% decline in non-emergent ER use and increased their 

physician office visits by 25%, demonstrating that the consumer-driven structure of the plan 

does not discourage participants from seeking needed care. HIP helps members understand the 

importance of where and when they seek health care services. Use of care among new and 

established HIP members over a 6 month time period demonstrates high growth in preventive 

care and primary care services, and a decrease in non-emergent use of the ER. Data indicates 

90% of established enrollees utilize primary care. 

Indiana has received confirmation of the greater access to much needed care provided by the 

HIP program for uninsured, low income Hoosiers from the managed care organizations for HIP, 

health care providers, and professional associations representing health care providers. 

For example, the CEO of MDwise, one of the managed care organizations for HIP, reported that 

the company's market research shows very high member satisfaction with HIP, and 83% of 

MDwise's HIP members received care as soon as they thought they needed it. In addition, 

MDwise reported that 76% of its HIP members take medications and are compliant with 

medication regimens and 96% of members are being treated for a chronic condition: thus, 

showing that these individuals are getting much needed access to care as compared to before 

they were enrolled in HIP. lastly, MDwise informed Indiana that it has received numerous 

member stories regarding HIP members' access to care that they had not received before 

enrolling in the program. 

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3. Nearly 10% of Medicaid beneficiaries have third-party coverage, in addition to their Medicaid 

coverage. In these circumstances, the third party payer is required to pay prior to Medicaid, 

as Medicaid, by statue, is the "payor of last resort." The Deficit Reduction Act of 2005 worked 

to ensure Medicaid is the payer of last resort by requiring states to amend their Medicaid 

programs with certain provisions. 

a. Are you aware of what challenges states continue to face in recovering third-party 

payments? 

b. What impediments prevent third-party payers from following through on their 

payments? 

States face a number of challenges with regards to recovering third party payments. These 

challenges come in the form of administrative and enforcement complexities for the state 

Medicaid agency, providers, and third party payers. 

Medicaid Agency 

In order to be in compliance with state and federal laws, Medicaid agencies are required to 

perform a number of functions that ar-e complex and difficult to enforce. First, agencies must 

collect information on any third party payers. While other state agencies can provide 

verification mechanisms (i.e. the Bureau of Motor Vehicles for aCCident compensation or a 

Department of Child Services to see if a parent has received health coverage for a child), 

Medicaid applicants and beneficiaries may not be forthcoming with information about third 

party payers - especially if they believe that admission of such coverage may jeopardize their 

eligibility for Medicaid. The state makes efforts to locate member third party liability (TPl) 

coverage and providers also provide this information at times. However, there is no guarantee 

that TPl information will be found prior to claims payment. 

Once the Medicaid Agency has managed to collect information about these third party payers, 

they must also capture and process information regarding the third party payer coverage. This 

coverage may be complex and highly varied from person to person. Before the state Medicaid 

agency decides to pursue payment from a third party, it should verify that the services or items 

for which it is requesting payment are also covered by the Medicaid State Plan. If the services 

are not covered by the Medicaid State Plan, the third party payer is not obligated to provide the 

Medicaid agency with compensation. 

Even when the services or items are covered by the Medicaid State Plan, payment collection can 

be difficult, as there is rarely any penalty for non-compliant third party payers. In an effort to 

address this issue, Kentucky has begun to seek implementation of monetary fines and penalties, 

license suspension, and/or revocation; and the state has classified non-compliance as an unfair 

trade practice. 

Providers 

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85441.056

Providers have a set period of time within which they must submit their claims; and many may 

delay claim submission. When a payment is recovered from a provider, it may not be within the 

filing deadline, and it would be too late to file a new claim. 

Third Party Payers 

It is the objective of the third party payers to retain as much of their income as possible, so third 

party payers impose a number of barriers for Medicaid agencies that would seek to recover 

funding. Some of these barriers are as basic as refusing to acknowledge that the organization 

meets the definition of a "third party" as outlined in the Deficit Reduction Act (ORA) legislation. 

If the organization recognizes that it is in fact a third party payer, it may use HIPAA's privacy 

focus as an excuse to deny requests for sharing membership files. This denial poses a challenge 

to Medicaid agencies in spite of a letter from CMS to Patrick Ryan, Illinois Medicaid TPL Director 

dated July 8,2009 in which CMS clarified that this sort of data sharing is permissible under 

HIPAA. Third party payers also resist sharing information with third parties acting on behalf of 

the state Medicaid agency, such as contractors or managed care entities, in spite of the fact that 

these parties are supposed to be considered an extension of the state Medicaid agency. 

Even when third party payers do acknowledge their beneficiaries and the entity tasked with 

funding recovery, it can still be difficult for Medicaid agencies to recover all of the funds they 

should. Information-sharing from third party to Medicaid agency may be incomplete, and 

service coverage may be sparse, so identifying matches between service provided and service 

covered by the third party payer may be difficult. In addition, payers may confuse, delay, or halt 

the recovery process by misusing Prior Authorization denials, requesting additional information, 

or by simply refusing to respond to recovery requests. 

4. How does the recent increased use of managed care in Medicaid influence third-party liability 

issues? 

The increased use of managed care has presented state Medicaid agencies with a series of 

options on how they would like to designate the responsibility of reimbursement recovery from 

third party payers. While some states have opted to exclude beneficiaries with third party 

payers from managed care, other states have allowed enrollment with managed care, in which 

the state may either retain the TPL responsibilities or designate the Managed Care Organization 

as responsible for recovering compensation from third party payers. In the latter, the state 

would adjust the capitation payment to recognize other funding sources for provider 

reimbursement. 

Regardless of whether funding recovery is subsequently handled by the state Medicaid agency 

or the Managed Care Organization, there are some unique challenges to coordinating that 

funding recovery. For example, in a commercial market, third party coverage may change and 

claims may be sent to the wrong carrier or contain outdated or incorrect information (Le. old 

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85441.057

group numbers or policy numbers). Third party payers may also fail to provide sufficient 

information to the claims processor regarding the beneficiary. This means that the recovery 

efforts may require more extensive research and processing time, which can create a significant 

administrative burden for the entity attempting to recover funding. 

Managed care influences TPL differently state to state. In some states if the recipient has other 

coverage they cannot be on a Managed Care plan so that the State can recover any TPL savings 

on the Fee for Service (FFS) recipients. For example, Massachusetts structures their TPl 

program in this manner today. 

In most states where MCO recipients can have other coverage, MCOs are required to perform 

TPl functions. There may be a lack of incentive for the MCOs to identify TPl and recover as it 

may reduce their claims and ultimately affect future capitation rate setting. Additionally, many 

MCOs have a parent company that also has a FFS population. These MCOs may choose not to 

recover from within their own corporation as they should. 

Additionally, in states where Medicaid MCOs have been delegated authority to perform their 

own TPl identification and recovery, they run into roadblocks collecting from other payers. TPl 

providers do not recognize the right of the Medicaid MCOs to collect. They reference DRA 

language which gives the states the right of recovery and not the MCO. As a result, CMS has 

recently posted guidance on their website empowering MCOs, stating that they are to be 

recognized as an agent of the state Medicaid agency; some states, for example Ohio and 

Colorado, have made compatible statutory updates. 

5. The dramatic expansion of Medicaid under ACA exacerbates the administration complexity of 

determining eligibility and tracking enrollees. How would this additional complexity influence 

the ability of states to ensure third-parties pay what they are responsible for? 

Expansion of Medicaid under the ACA may have two very different impacts on a state's ability to 

ensure third parties pay what they are responsible for: 1) the increased case load and increased 

variety of coverage options may make it even more difficult to track beneficiary coverage; and 2) 

the increased coordination between the federal and state governments, particularly in the area 

oftechnology and information-sharing may help states to identify possible third party payers 

that they might not have identified otherwise. The identification of these third party payers will 

only be helpful, however, if states are able to translate that information into increased service 

and item cost recovery. 

In order to improve third party payments, federal and state governments will likely need to 

coordinate to send a clear and consistent message to third parties, addreSSing the common 

excuses for avoiding or denying payment. Failure to address these excuses while proceeding 

with a Medicaid expansion will only lead to expanded failure to recover funding from third party 

payers, and Medicaid will continue to, in practice, serve as the payer of first resort. 

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The Honorable Bill Cassidy 

1. In your testimony you highlight the fact that current Medicaid regulations "disempower 

individuals from taking responsibility for their health" and that within the Medicaid program 

"there are no incentives for states to achieve quality outcomes." These two areas must be 

addressed in order to achieve better health outcomes and responsible state and federal 

health care spending. 

The concept of patient activation and the robust science behind it is rooted in the notion of 

empowering individuals. By definition, activated patients effectively manage their own health 

to the degree that they are competent to do so. Once a provider understands what an 

individual is and is not capable of, the provider can identify behavior change opportunities 

that are realistic and achievable. Through tailored support and education, patients become 

more successful managers of their health and healthcare. This approach has proven to reduce 

emergency room visits, hospital admits and readmission, increase medication adherence and 

improve chronic condition management. 

A limited number of Medicaid programs are utilizing the Patient Activation Measure survey in 

order to improve allocation of resources and provide real patient-centered care·to treat the 

individual, not simply their symptoms. Organizations using PAM have demonstrated 

improved outcomes and cost savings of $300 to $3,700 per patient per year depending on the 

program. Cost savings are driven by fewer ER visits and hospital admits. 

Do you agree that in order to substantially improve outcomes and lower healthcare spending, 

patients must be engaged in managing their own health? Should federal Medicaid regulations 

facilitate the incorporation of patient activation measurement in state's Medicaid programs? 

Medicaid beneficiaries must be engaged in managing their own health; an essential component 

of Medicaid programs should be to improve health outcomes and lower health care spending. 

There are different ways to incentivize Medicaid beneficiaries to be more proactive in their 

health care decision making. States I have worked with have used high-deductible health plans 

with financial responsibility along with incentives to waive such financial responsibility with the 

completion of certain healthy behaviors, such as obtaining preventative services or participating 

in a weight loss or smoking cessation program. Other measures that can be taken to encourage 

beneficiaries to become more engaged in managing their care and making better health care 

decisions are education, coaching, and involving beneficiaries in the management of their care 

or, otherwise, making them an integral part of their health care team. However, the member 

must have "skin in the game," and a vested interest and incentive to improving their health. 

The Patient Activation Measurement (PAM), a survey that measures how "activated" or involved 

a patient is with their care, could be a useful tool for health care providers to utilize in 

understanding where their patients fall on the "activation" or involvement scale. This better 

understanding could assist health care providers in knowing how much encouragement or 

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85441.059

coaching patients might need to become more "activated" or involved in theirhealth care 

decisions and management and in tailoring the patients' care to better meet their needs. 

While I do believe the PAM survey could be beneficial, the current federal Medicaid regulations 

do not call for States to implement any type of patient survey similar to the PAM survey, and 

States would need to evaluate how it could be implemented within their programs. 

In sum, we need to do better than simply paying Medicaid beneficiaries' claims. In order to 

bend the cost curve and improve health outcomes, we need to employ multiple strategies, and 

such strategies cannot exclude incentivizing beneficiaries to be directly involved with and 

responsible for their health care decisions and disease management. The current facade of 

Medicaid is outdated and must change in order to include the up-to-date knowledge we have 

gained from the private market and studies regarding the benefits of beneficiary accountability 

and involvement in their health care decisions. 

The Honorable Gus Bilirakis 

1. Can you talk about your work with states and working with CMS on obtaining an 1115 waiver? 

Florida took almost two years to get an 1115 Medicaid waiver for a state wide managed care 

plan. What have other states tried through the waiver process? How was interacting with CMS 

during this process, and how long did it take for CMS to approve the waiver? 

The timing, process, and resulting waived provisions for states going through an 1115 waiver 

process varies greatly and is inconsistent across different states and 1115 demonstration 

applications. Some States have seen their waivers go through in a matter of weeks, or months, 

whereas other States may take years to receive responses, if there is a response. Another 

concern is the demonstration periods. More recently, in the case of waiver extensions, CMS is 

granting 1-year waiver, as opposed to the maximum 3 year waiver periods. While they indicate 

this is due to wanting to understand the impact of the ACA, waiver applications represent a 

significant effort for States and having to develop and negotiate the applications within a year is 

a large undertaking. The short periods also do not allow for relevant data to be collected to 

inform CMS of the waiver's impact. 

States can also be faced with the challenge of CMS' shifting position on policy issues during the 

waiver approval process. For example, Louisiana submitted a 1915{c) waiver request in May 

2008 for an Adult Residential Care (Assisted Living) Waiver. The waiver included a provision to 

convert empty nursing home stock into new residential settings as has been done with CMS 

approval in many states. The state responded to a CMS Request for Additional Information, and 

upon submission was given the impression that the only outstanding issue was migration of the 

waiver application to a new version. In the time that elapsed while the state migrated to the 

new version, CMS's position changed and the state was informed verbally that the waiver would 

not be approved as the conversion option would not meet the new CMS definition of a home 

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85441.060

and community based setting. While the state argued that the proposal met all the published 

guidelines at the time, CMS formally denied the waiver in August 2011, over three years past the 

original submission. 

Many states have noted slow progress in negotiations with CMS including consistent back and 

forth in questions, clarifications and requests for revisions. It is not unheard of for waiver 

negotiations to take upwards of a year or more. However, some states do experience a more 

streamlined approval process with CMS, and approvals for 1115 demonstrations can be granted 

quickly. For example, in 2010 Louisiana received approval in approximately 30 days for an 1115 

waiver to provide primary and behavioral health care benefits to uninsured adults in the greater 

New Orleans region which was put together to serve as a bridge from the expiration of a postKatrina federal primary care grant. 

2. The recent Oregon Medicaid study published in the New England Journal of Medicine seemed 

to show that individuals on Medicaid did not have better health outcomes than individuals 

without health insurance. Have you seen the study and what are your thoughts on it? 

Despite the growing investment of states in their Medicaid programs, this study in the New 

England Journal of Medicine "showed that Medicaid coverage generated no significant 

improvements in measured physical health outcomes.,,7 Medicaid coverage alone does not 

guarantee improved care or outcomes. This is a key issue for states to consider as they 

contemplate Medicaid expansion. 

The focus of Medicaid reform must be on rethinking how care is delivered and ensuring access 

and quality outcomes. Providing a Medicaid card to new recipients, without fundamental 

restructuring of the program will only increase taxpayer spending without delivering results. 

Medicaid must be transformed to focus on access, outcomes and quality. This requires a 

realignment of incentives for states, providers, and recipients; for maximum effect all health 

system actors must have common goals. Federal policy should support this realignment and 

provide states with the tools to implement innovative strategies such as shared savings models, 

provider bonuses, financial incentive, and bundled payments. 

7 Baicker,K., Taubman, S., Alien, H., Bernstein, M., Gruber, J., Newhouse, J., Schneider, E., Wright, B., Zaslavsky, A., 

& Finkelstein, A. (2013). The Oregon Experiment - Effects of Medicaid on Clinical Outcomes. New England 

Journal of Medicine, 368,1712-22. Retrieved online: 

http://www.nejm.org/doi/fuli/l0.1056/NEJMsa1212321#t=abstract 

18 
101 


85441.061

July.1,201.1 

fk Joseph \\', llwlllPSOl1 

Surgn'll G.:neral. Stale ,)f Arkansas 

Director- Arh(lllsas Ccnkr f()r Ikallh Iml'1I',",\',>"",,,. 

140 I Capitol ;\H'IllIC, Su;te 300, Vk:tory 

Little Roek. AR 72201 

Dear Dr, Thomps(\n: 

ThanK you 1(,)1' 

tc'sl tl) at the hearing 

bl'!i)!\: the Suhcmumi!t<:e on H<:allh Oil W,,,hWSfi!J\' June 12,::;01 

:-':eed for Medicaid Rd{lrm: ;\ State l\:rsp<:cti,,'. 

Pursuant to the Rules ofthe Commiltee on Energ) and Commerce, the hearing record remain, 

open for ten bus inc", to permit i\lcmbcrs to submit additiollal for the record, which arc 

allached,fhe !fmnal resp,)Ilses to these questions dlllUld as follows: (1) the nam.: oftl1e 

\lcmbt:r \\hose qUesliol1 you arc addr~ssing, (2) the c(llllplele kxt of the question you arc addressing i 

bold. and (3) your answer to that quest ion in plain text 

To lildlitatc the printing of the hearing record, pleasc respond to the's,: questions by the close 

business on Fridny, July 1<), :'0]3. Your rcSpOthCS should be mailed to S)tine Ilamick. I.egislativc 

Clerk. Cllmmillce ,1n Energy and Commerce. 2125 Rayburn I louse Ofllcc Building, Washington, D,( 

20515 and e-mailcd in Word 1clrmal to Snliw.Harwkl<i(nmiUwus(·,goY. 

Thank YO!l again t(lI' yOUI' lime ilnd citelrl preparing and dcliH:ring testimony bellm: Ihe 

Subcollllnilice. 

cc The Hontlrable Frank Pallone. Jr.. Ranking ),lcmber- Subcommittee on Health 

Attachment 
102 


85441.062

July 19,2013 

Sydne Harwick 

Legislative Clerk 

Committee on Energy and Commerce 

2125 Rayburn I10use Office Building 

Washington, DC 20515 

Dear Ms. Harwick: 

Please find enclosed my responses to the questions for the record regarding my testimony 

before the U.S. House of Represenlatives, Committee on Energy and Commerce, 

Subcommittee on Health hearing on Wednesday. Jlme 12,2013, entitled "The Need fcw 

Medicaid Refoml: A State Perspective." 

Thank you for thc opportunity to testify on this important issue. Please teel free to 

contact me if additional infol1nation is needed. 

Best regards, 

Joseph W. Thompson, MD, MPH 

Snrgeol1 General, State of Arkansas 

Director, Arkansas Center for Health Improvement 

ce: Governor Mike Beebe. State of Arkansas 

Arkansas Congressional Delegation 

Arkansas House ofReprcscmatives, Speaker of the House 

Arkansas Senak, President Pro Tempore 
103 


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Page 1 of7 

Arkansas Surgeon General Joe Thompson's response to questions related to appearance 

before the Subcommittee on Health of the US House of Representatives-Committee on 

Energy and Commerce (June 12,2013 - "The Need for Medicaid Reform: A State 

Perspective") 

l. Your state has reached a preliminary agreement with the U.S. Department of Health 

and Human Services (HHS) to use Medicaid dollars to pay for private coverage sold 

on the insurance marketplaces that are being created by the ACA, correct? 

The state has reached an agreement with the Secretary of the U.S. Department of Health and 

Human Services (DHHS) conceptually regarding Arkansas's planned use of Medicaid dollars for 

premium assistance to purchase Health Insurance Marketplace (HIM) qualified health plan 

coverage for those who would have otherwise been eligible for Medicaid expansion under the 

Patient Protection and Affordable Care Act (PPACA). This concept has been authorized 

legislatively by the state via the Health Care Independence Act of 20 13, 1 also commonly known 

as the "private option." The state is currently pursuing an 1115 waiver with DHHS to implement 

the private option. 

2. Do you believe your state has enough providers to support coverage of additional 

beneficiaries? 

Like many other states, Arkansas faces primary and specialty care workforce shortages. The 

greater issue in Arkansas is the mal distribution of its health care workforce, 'With urban areas 

having potentially excess supply and rural areas having critical shortages. Unlike many other 

states, Arkansas has taken a comprehensive approach to health care system transformation. 

Rather than pursue coverage expansion for Arkansans in isolation, the state simultaneously 

engaged in initiatives beginning in 20 I 0 to develop a strategic plan to address workforce issues, 

optimize the use of health information technology, and transition from a volume-based to an 

outcome-based payment system using a public-private collaborative approach. Removing the 

financial barrier to coverage for uninsured Arkansans-some of whom reside in counties where 

the uninsured rate is near 40 percent-is not an immediate solution to workforce issues. 

However, providing a paying source for providers is a first step toward stimulating business 

growth in health care services and should be accompanied by incentives that improve patients' 

health care seeking behavior. 

a. Do you believe that, had Arkansas chose to undergo a standard Medicaid 

expansion under tbc ACA, there would have been enough providers to support 

such an expansion? 

Under a traditional Medicaid expansion as contemplated by PPACA, Arkansas would likely 

not have had enough participating providers to meet demand from an additional 250,000 adult 

eligibles. Eligibility for Arkansas's Medicaid program is among the most restrictive in the 

nation for adults. While the state's Medicaid program maintains a network of providers who 

are responsive to the demands of the current Medicaid population-largely comprised of 

children and the aged, blind and disabled-the state would have had significant difficulty 

1 Acts 1497 and 1498 of 2013 

AeFf1 i.r a lIollparti.rall, illdependent, bea/I/! polie)' (wier that SCTl'f.r as a ({Ita/I'I to lil1pml'f Ibe health ofArkallJall.r. 

1401 \,'est Capitol Aycnue 

Suite 300, Victory Building 

Litlle Rock, Arkansas 72201 

,\v\Y'W.achLnet 
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Page 2 of7 

building a network to meet the demand of the newly covered population. Building a sufficient 

network would have required robust recruitment inclusive of increased reimbursement rates 

approaching that offered in the private insurance market. 

b. How does your state's plan insure access to a sufficient number of providers? 

In the short term, capacity constraints particularly in rural areas may delay services for nonacute needs (e.g., preventive screening). However, the use of private qualified health plans' 

provider networks and leveraging the HIM network adequacy requirements will help to 

mitigate provider access issues. Longer term workforce goals as outlined in the state's health 

workforce strategic plan--team-based care, optimal use of heath infomlation technology, and 

financing arrangements that will promote patient-centered medical homes, including the use of 

physician extenders in remote locations-are also underway. 

3. Last year CBO estimated that private insurance plans cost nearly 50 percent more 

than Medicaid. In Arkansas' own actuarial analysis, it was found that the difference 

in provider rates between the private market and Medicaid is less than 25%. The 

report also indicated that there may be actual cost-savings associated with the 

Medicaid proposal. 

a. What evidence is there that placing Medicaid beneficiaries into the private 

insurance marketplace will achieve cost-savings? 

Analysis released from the Arkansas Department of Human Services (DHS) earlier this year 

shows the estimated financial impact of the private option. The estimates point to several 

differences in the Arkansas market for which the CBO estimates were unable to account by 

using national averages for Medicaid costs and national estimates of rate differences between 

Medicaid and private carriers. As noted, Arkansas analysis showed that the average difference 

in Arkansas was less than half of that estimated nationwide. Beginning with this Arkansasspecific baseline, the analysis projected a 5 percent reduction in private provider 

reimbursement rates due to the introduction of 250,000 individuals into the market, generating 

deflationary price pressure on commercial carrier contracts with providers. Competitive 

pressure from qualified health plan management and transparent pricing in the Marketplace is 

estimated to reduce premiums by an additional 5 percent, a reduction that would be shared by 

premiums for all individuals (e.g., above and below 138% FPL) across the Marketplace, not 

just plans in which private option eligibles can enroll. Extracting medically frail populations 

from eligibility for the private option is estimated to further reduce Marketplace premiums. 

All of these factors-combined with a displaced need to increase provider reimbursement 

under a traditional expansion-results in an impact that could drive the incremental costs of 

the private option to zero, or even produce cost savings, depending on thriving competition 

and strategic qualified health plan management. 

b. Will the "actuarial soundness" certification regUlations which apply to Medicaid 

managed care plans also apply to the exchange plans offered to Medicaid 

beneficiaries? 

AeH! is a II011pm1istJll. illdepmdmt, ;'ealth polic!, {filter tba! sell'es as 0 cotal)'J! to illlprore tbe beallb of ArkollJallJ. 

1401 Yi"est Capitol J\Yenue 

Suite 300, Victory Building 

Little Rock, J\rkansas 72201 

,,,,,,""W.achi.net 
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Page 3 0[7 

Actuarial soundness requirements that are applicable to all qualified health plans offered 

through the HIM will apply to the plans from which private option eligibles will be able to 

choose. 

c. How will the state address the vast difference in provider rates that will likely 

occur between Medicaid provider rates and qualified health plan provider rates? 

While private insurer provider rates are greater than those currently provided by Medicaid, the 

differences in those rates in Arkansas do not appear to be as "vast" as they are in the m'li orily 

of other states. A traditional Medicaid expansion would have required an increase in provider 

rates to meet access requirements. A coverage expansion via the private option is expected to 

produce deflationary pressure on private market rates given the volume of new patients with a 

paying source and will reduce uncompensated care costs, which is now reflected in an 

approximate 8 percent hidden surcharge in premiums. 

4. In a recent memo to states from HHS, Secretary Sebelius stated "beneficiaries must 

remain Medicaid beneficiaries and continue to be entitled to all [Medicaid] benefits 

and cost-sharing protections." It seems HHS is actually eliminating the benefits the 

state hoped to achieve through the private insurance market and thus make the state 

Exchange look more like Medicaid. 

a. How will the private plans offered to Medicaid beneficiaries in the Exchange 

compare to Medicaid, in terms of cost-sharing and benefits provided? 

Medicaid cost sharing requirements will be satisfied by all silver level qualified health plans 

offered to individuals eligible for the private option. Required Medicaid benefits not already 

covered by qualified health plans--non-emergency transportation, oral and vision care for 19-

and 20-year olds-will be "wrapped" for beneficiaries, provided by fee-for-service Medicaid. 

b. Will Medicaid continue to provide wrap-around services for those services that 

are not covered in the standard set of benefits? 

Yes, fee-for-service Medicaid will provide those services to beneficiaries. 

c. Will these wrap-around benefits include the cost-sharing portion of the plans? 

Private option beneficiaries between 100-138 percent offederal poverty level (FPL) and 

subsidy-eligible beneficiaries between 139-150 percent FPL will be subject to costsharing that complies with Medicaid requirements. Private option eligible beneficiaries 

under 100 percent of FPL will have no-cost sharing in the first year of the program. 

ACHI1:r a llo11pm1i.ron .. iJldpendent, lim/til prtlit), rmler thaI Jf17'eJ tJJ a raJa!)'J! 10 iJJlprol.'e jlle health ?( /1rkoIJJt7m. 

1401 \X'est Capitol A,-enue 

Suite 300, Victory Building 

Little Rock, Arkansas 72201 

"\VW\V.achLnet 
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Page 40f7 

d. Under the ACA, the federal government established new provisions to stabilize 

the cost of insnring beneficiaries through the Exchange: reinsurance, risk corridors, 

and risk adjustment. Will the Medicaid population enrolled in Exchange health 

plans be included in these programs? 

i. If YES - how will these additional costs be distributed to other beneficiaries 

within the Exchange? 

ii. If NO- will these pro"isions be applicable in just the Medicaid pool? Ifso, how 

will costs be distributed among Medicaid beneficiaries? 

The risk adjustment, reinsurance, and risk corridor programs will apply to the qualified health 

plans offered to private option eligible. which are also plans in which subsidy-eligible individuals 

will be enrolled. The risk pools will not differ; costs will be distributed no differently than they 

are for other beneficiaries in the HIM. 

e. What tlexibilities does Arkansas require from HHS to provide true consumer 

driven, market-based insurance? 

Flexibility pursued via the proposed 1115 waiver process currently under public comment prior to 

state submission includes the following requests: 

ACl-fI i.r (J 1l0JIjJClJ1i.ralJ. illdepeJIdml, /Jfrl/tb po/iey rellier lilal .re17'(J I1J 11 (rlleIl)'.rl 10 JiJJprlJl'e tile health ofArkallJallJ. 

1401 \'('est Capitol Awoue 

Suite 300, Victor\, Building 

Little Rock, t\rkansas 72201 

v.'Ww.achLnet 
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Page 5 of7 

... U~e fot Waiver Reason for Waiver Request Waiver Autbority 

To enable the State to apply the 5% cap This waiver authority will allow the State to 

on cost~sharing on an annual, rather align with how carriers will apply the annual § 1902(a)(14) than quarterly. basis. cost-sharing limit for commercial coverage in 

the individual market. 

To permit the State to limit This waiver authority will allow the State to 

reimbursement for federally qualified limit its financial exposure and align 

health centers (FQHC) and rural heal!h reimbursement to FQHCs/RHCs for Private 

centers (RHC) to the amount the Option beneficiaries with QIIPs' contracted § 1902(a)(15) FQHCiRllC negotiated with the QllP rates. 

carrier. rather than the amount 

established under the prospective 

payment system. 

To permit the State to provide coverage This waiver authority will allow the State to 

through different delivery systems for test using premium assistance to provide 

different popUlations of Medicaid coverage for QHPs offered in the individual 

beneficiaries. Specifically, to permit the market through the Marketplace or a subset 

State to provide coverage for Private of Medicaid beneficiaries. § 1902(a)(l7) Option eligible Medicaid beneficiaries 

through QHPs offered in the individual 

market. The State is not requesting a 

waiver of comparability with respect to 

benefits, eligibility, or cost-sharing. 

To make premium assistance for QHPs This waiver authority will allow the State to 

in the Marketplace mandatory for require that Private Option eligible 

Private Option beneficiaries and to beneficiaries receive coverage through the 

permit the State to limit beneficiaries' Demonstration. and not through the State 

freedom of choice among providers to Plan. This waiver authority will also allow § 1902(a)(23) 

the providers participating in the the state to align the network available to 

network ofthe Private Option Private Option beneficiaries \vith the network 

beneficiary's QllP. offered to QHP enrollees who are not 

Medicaid beneficiaries. 

To pennit the State to limit a Private This \vaiver authority v·,rill allow the State to 

Option beneficiary to receiving align the prescription drug benefit for Private 

coverage for drugs on the formulary of Option beneficiaries with the prescription § 1902(a)(54) 

the Private Option beneficiary's QHP. drug benefit offered to QHP enrollees who 

are not Medicaid beneficiaries. 

To permit the State to require that This waiver authority will allow the State to 

requests for prior authorization for align prior authorization standards for Private 

drugs be addressed within 72 hours, Option beneficiaries with standards in the § 1902(a)(54) rather than 24 hours. A 72-hour supply commercial market. 

ofthe requested medication will be 

provided in the event of an emergency. 

~/lCHl is tI flollpal1iwn, illdPpendflll) bea/lb po/I':)' em/a that Jef1'es as a tata!),Jt to illlProl'f tbe health qf Arkamflm, 

1401 \\'est Capitol [henue 

Suite 300, Victon' Building 

Little Rock, Arkansas 72201 

",·w'w.achLnct 
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Page 6 of7 

5. Nearly 10% of Medicaid beneficiaries have third-party coverage, in addition to their 

Medicaid coverage. In these circumstances, the third party payer is required to pay 

prior to Medicaid, as Medicaid, by statnte, is the "payor of last resort". The Deficit 

Reduction Act of 2005 worked to ensnre Medicaid is the payer of last resort by 

requiring states to amend their Medicaid programs with certain provisions. 

a. Are you aware of what challenges states continue to face in recovering third-party 

payments? 

Yes 

b. What impediments prevent third-party payers from following through on their 

payments? 

I am aware that states, including Arkansas, face challenges when applicants fail to realize that 

they may have other coverage or do not disclose that they have other coverage in fear that they 

may be disqualified. Because low-income individuals have constant shifts in employment and 

family situations, their access to coverage other than Medicaid is dynamic. Even where an 

applicant may fail to disclose the availability of other coverage, Medicaid's access to enrollment 

data to cross-check that availability is sometimes lacking due to concerns from third parties-and 

even other state or federal entities--about releasing information to Medicaid. States also face a 

litany of challenges related to third parties not responding to filed claims or not processing claims 

in a timely manner. Regarding pharmacy benefit managers (PBMs), many states face challenges 

related to PBMs' claims that they lack the authority to reimburse Medicaid directly. 

I am also aware that payers face technical challenges with processing Medicaid and Medicaid 

managed care claims and that, in response, many states have looked to alternative methods of 

processing those claims. Also, many states lack an enforcement mechanism to incentivize third 

parties from following through on their payments. 

6. How does the recent increased use of managed care in Medicaid influence thirdparty liability issues? 

Unlike many other states, managed care has never been a delivery model Arkansas has used for 

its Medicaid program. Therefore. we have no first-hand knowledge of how the increased use of 

managed care mayor may not influence third-party liability. 

7. The dramatic expansion of Medicaid under ACA exacerbates the administration 

complexity of determining eligibility and tracking enrollees. How would this 

additional complexity influence the ability of states to ensure third-parties pay what 

they are responsible for? 

The ACA provides resources to states to improve eligibility and enrollment systems and, for 

some states, actually makes eligibility determination less burdensome by eliminating asset tests. 

In Arkansas, the private option leverages the protections guaranteed by the HIM and the 

efficiencies provided by the private market to better ensure that beneficiaries and the state are 

getting a product that improves access and quality. 

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1401 \\'est Capitol thenue 

Suite }OO. Victory Building 

Little Rock. Arkansas 72201 

,\,"'WW.achLnet 
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Page 70f7 

The Honorable Gus Bilirakis 

1. Can you talk about your work with states and working with CMS on obtaining au 

1115 waiver? Florida took almost two years to get an 1115 Medicaid waiver for a 

state wide managed care plan. What have other states tried through the waiver 

process? How was interacting with CMS during this process, and how long did it 

take for CMS to approve the waiver? 

Arkansas's experience with the US DHHS thus far has been a cordial and collaborative one. 

DHHS has provided a streamlined template for the waiver application and has been available and 

responsive to the state's questions and concerns throughout the process. Beginning two weeks 

after the private option was authorized, state officials began meeting with DHHS officials-both 

from CMS and the Center for Consumer Information and Insurance Oversight (CCllO)-{)n a 

regular basis to work through the waiver process. We anticipate filing the waiver in early August 

and expect approval in time for HIM open enrollment. Other states have proposed a variety of 

1115 waivers, ranging from block grants to targeted demonstrations for family planning services 

or delivery models for developmentally disabled populations, but Arkansas's proposed waiver to 

use premium assistance to purchase private coverage through the Marketplace will be the first of 

its kind. 

2. The recent Oregon Medicaid study published in the New England Journal of 

Mediciue seemed to show that individuals on Medicaid did not have better health 

outcomes than individuals without health insurance. Have you seen the study and 

what are your thoughts on it? 

This was a short-term but powerful study that had the expected short term results with regard to 

chronic disease. Chronic diseases develop over time and will require long term efforts and 

observation to gauge the effectiveness of Medicaid coverage. What is encouraging from the 

report is the significant increased use of preventive care, screening services and prescription 

drugs. This would portend more effective management and avoidance of future chronic disease. 

Overall, results exemplifY the need to further study the effects of increased coverage using 

different delivery models, inclusive of Medicaid. The study's findings on health outcomes in 

Medicaid-though touted by many as proof that Medicaid is a flawed delivery model on the 

whole-suffer from significant limitations to jump to such a conclusion. Our health care system 

is no doubt in need of quality improvement, but this need is not unique to Medicaid. Dissolving 

the Medicaid program is not a rational solution to poor health outcomes in our health care system; 

neither is simply providing individuals with financial access to coverage and sending them on 

their way. A more comprehensive strategy is necessary, one that has a multi-payer approach, 

ensures adequate access to a quality workforce, and incentivizes providers to deliver more costeffective, quality care and consumers to seek care in an appropriate manner. 

ACF-II is 0 flollpmtison. illdtpmdmt, health policy [mtfr that sems as a mta!rsl1o illlproJ'e Ihe heallh o/ArkansallJ. 

1401 \\'est Capitol Ayenue 

Suite 300, Victory Building 

Little Rock, Arkansas 72201 

www.achi.net 
110 


85441.070

{vIr. AllIhony E. Kcek 

Director 

$,'ut11 Carolina Department of Health and 

Human Services 

P.O. Box 8206 

Colmnbin. SC 29202·8)06 

Dear Mr. Kcck: 

July J, 2013 

Thank yl\U fpr 

testify at the hearing 

bt'llm~ '\lw SlIbcoll1minlCe ollllenhh on \\"ctillCStin". June 12, :013, to 

Need ttlr iVkdicaid Refcwm: A State Perspectin!. 

Pursuant to the Rules llf the Committee on Ellers, and COl11l11t'rce. the bearing record remains 

opc'n JClI' ten nusiness tt' permit 'Ykmbers Itl submit additioDid questions {(lr the rec(lrd, ,.,hieh arc 

!ltlnch,,!L The !i.lrlllat responses to these questions should be (1S i'lilows: (I) the nalTle of the 

"vlember whosc question you arc addressing, (2) the complete text of the question you an: addressing in 

bold, and (.1) your allS\\er to that question in plain (ext. 

To facilitate the printing oflhe hearing reeord, piea5c respond to these questions by the close of 

business on Friday. July 19, 2013, Your responses should be mailed to Sydlle Harwick, Legislative 

Ckrk. Committee on Encrgy and Commerce. 21::5 Rayburn !lome Officc Building. Washington, [),C 

20515 and e'mai"'d in Word f(lrmat to Svdnc.Hanvkki,:maiLhouse,g"'·, 

Thank you ag.ain fill' ](lur lime and d'f<.m preparing and dcliwring testim()llY bd()J'c the 

Subcommittee. 

Sincerely. 

/ 

cc: The Ilonorabic Frank Pallone, Jr., Ranking .\1embcr. Subc()nrmiltcc on ! knlth 

Allachment 
111 


85441.071

July 31,2013 

The Honorable Joseph R. Pitts 

Chairman 

Subcommittee on Health 

U.S. House Committee on Energy and Commerce 

2125 Raybum House Office Building 

Washington, DC 20515-6115 

Chairman Pitts: 

Thank you for allowing me the opportunity to present to the House Committee on 

Energy and Commerce's Subcommittee on Health June 12, 2013, regarding the 

need for Medicaid reform. it was an honor 10 share my perspective with the 

membera, and gain some perspective on the issues important to them. 

you or any 

rasponses to the additional questions posed by members. If 

have questions regarding these, please contact me. 

Thank you for your service in the U.S. House, and your commitment to exploring 

ways to reform our states' Medicaid programs. If I can ever be of assistance, 

please Ie! me know. 

Sincerely, 

Anthony 

~. 

E. Keck 

AEKlkl 

Enclosure 
112 


85441.072

Responses to Follow-up Questions from House Energy and Commerce Hearing 

Director Tony Keck, South Carolina Department of Health and Human Services 

The Honorable Joseph R. Pitts 

1) Most states have implemented Medicaid managed care to some degree, but there remain certain 

iireas of the program that do not have much managed care penetration, slJch as long-term care and 

behavioral health. Obviously, there are valid concerns about these especially vulnerable 

populations, but as Medicaid costs continue to balloon, do you see a need for more managed care 

in these areas? If so, what kind of rules, if any, should the Congress or the Administration give 

states with regard to Medicaid managed long-term care and/or behavioral health? Are there 

particular state programs that serve as an effective model for how to implement managed cafe In 

these areas of Medicaid? 

The term "managed care" Ciln be applied to a broad spectrum of delivery and financing mechanisms 

used in Medicaid. These indude Primary care Case Management (PCCM) programs which overlay 

patient cafe management expectations and care management payments on a traditional Fee-ForService (FFS) primary cafe system as well as capitation payment to private health plans to accept full 

financial risk for certain Medicaid populations. 

There is dear evidence in South carolina Medicaid and nationally that these managed care 

mechanisms generally produce better quality at lower overall cost than unmanaged FFS. Yet FFS 

continues as the default preference for the Centers for Medicare and Medicaid Services (CMS). In 

fact, individuals and population groups most in need of comprehensive care management - such as 

individuals living with disabilities and foster children - are often excluded from mandatory 

enrollment ill managed care without a waiver. 

Instead of requiring that states obtain waiver authority Congress should Implement legislation that 

requires all individuals to be enrolled in some form of managed cafe as the default, and that mutually 

agreed upon and nationally validated outcome measures for access, quality and cost control are 

identified, measured and reported on a regular basis. 

2) Much news has been made In recent months about using Medicaid dollars to enroll individuals in 

private coverage through the state exchanges. What federal barriers exists for states to exercise 

this option, and what unanswered questions do states have with regard to premium assistance? 

There seems to be a fundamental misunderstanding of recent efforts by several states to provide 

"private coverage" in lieu of Medicaid expansion: 

A. States already use private health plans to manage millions of current Medicaid beneficiaries 

in FFS and both PCCM and capitated Medicaid managed care. This is not new. 

B. States illvolved in ·private coverage" negotiations are planning to cove( the same population 

and number of covered lives as would otherwise be covered under the Affordable care Act 

Medicaid expansion. 

C. Tvpical Medicaid premium assistance combines contributions from employers, the individual 

and the state to achieve cost effectiveness. In the states currently negotiating these "private 
113 


85441.073

Responses to Follow-up Questions from House Energy and Commerce Hearing 

coverage" arrangements, employers do not appear to be eligible to contribute ilnd 

beneficiary cost sharing - especially under 100% FPl- appears to be limited. 

D. States that currently pay private health plan premiums to manage Medicaid lives operate 

similar to self-insurers where premiums are set to reflect the service utilization of the 

covered populations - not of the general population. Current models being negotiated with 

CMS that propose to pay the health insurance exchanges/marketplaces a market-based 

premium forgoes the advantage of self-insuring and puts Medicaid in the position of being 

premium "price-taker" on the open market. In fact, where medically frail populations are 

being carved out of the exchange/marketplace and placed in traditional Medicaid, states will 

end up not only managing and paying for the most costly individuals, but will also pay 

excessive premiums on the exchange/marketplace for the remaining Medicaid expansion 

beneficiaries that are healthy, low-utilizers of services. This arrangement actually subsidizes 

exchanges/marketplaces that may struggle with adverse selection and low enrollment by 

guaranteeing a base of healthy (and profitable) Medicaid beneficiaries. If and how the OMS 

will certify that these arrangements are cost neutral is unclear. 

The Honorable Michael Burgess 

1) The Medicaid statue 1903(m)(2){iii) requIres that state payments to managed care entities be ma<:ie 

on an actuarially sound basis. In 2009, the Government Accountability Office (GAO) was asked to 

investigate (MS's oversight of the state's compliance in meeting the statutory requirement. The 

GAO found that CMS has been inconsistent in reviewing states' rate setting for compliance with the 

Medicaid managed care actuarial soundness requirements, which specify that rates must be 

developed in accordance with actuarial principles, appropriate for the population and services, and 

certified by actuaries. 

a. Can you explain how your states analyzes, interprets and calculates payments made to 

managed care entities on an actuarially sound basis? 

b. What methods are used to determine if rates paid to managed care entitles are actuarially 

sound? 

c. What methods are used to confirm the accuracy of data used in computing actuarial 

soundness? Are the plans consulted to confirm accuracy oUhe data? 

The South Carolina Department of Health and Human Services (SCDHHS) contracts with an actuarial 

consulting firm, Milliman, Inc., to provide the actuarial certification required under 42 CFR 438.6(cl 

regarding actuarlall\, sound capitation rates. The actuaries involved in the capitation rate development 

and rate certification afe Members of the American Academy of Actuaries and meet the Qualification 

standards established for rendering the certification. The actuaries have extensive experience in 

Medicaid managed care programs. 

CMS regulations govern the development and approval of capitation rates paid b\, state Medicaid 

agencies to Medicaid Managed tare Organizations (MCOs) under full-risk contracts, including: 
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• Code of Federal Regulations, 42 CFR 438.6{c) 

• The CMS rate setting checklist, also known as "Appendix A, PAHI', I'IHP and MCO Contracts 

Financial Review Documentation for At-Risk Capitated Contracts Rate setting" 

These regulations require capitation rates to be actuarially sound and that states obtain an actuarial 

certification from a qualified actuary. CMS does not have set criteria to determine actuarial soundness 

of capitation rates and relies on qualified actuaries to certify to the soundness oHhe fates in an 

actuarial certification. However, CMS uses a checklist to assist the regional offices in reviewing the 

materials prepared and submitted by the states and their consulting actuaries in support of their 

proposed Medicaid managed care capitation rates. The checklist is also used to document the 

capitation rate methodology and assumptions used in developing the capitation rates. The checklist was 

issued in draft form in July 2003. eMS has begun a review process of the checklist and is antidpated to 

issue an updated checklist. 

In 2005, the American Academy of Actuaries published a nonbinding Practice Note to be used as 

guidance to actuaries certifying Medicaid capitation rates. The goals of the Practice Note were to: 

• Provide guidance to the actuary when certifying rates or rate ranges as meeting the 

requirements of 42 em 438.6!c) for capitated Medicaid managed care programs, and 

• Provide examples of responses to certain situations and issues. 

However, practice notes do not have the seme standing as an Actuarial Standard of Practice (ASOP) in 

determining what constitutes generaUy accepted actuarial princlpies and practices. ASOPs are 

considered part of an actuary's professional code of conduct and have the highest standing. In contrast, 

practice notes are not a definitive statement as to what constitutes generally accepted practice. 

Currently, no ASOP applies specifically to actuarial work performed to comply with CMS requirements 

for rate certification. However, several ASOPs apply to certain components of a Medicaid managed care 

capitation rate development methodology. For example, ASOP No.23 on Data Quafity addresses the 

binding guidance to an actuary surrounding the topic of data. The Amerir.an Academy of Actuaries 

Actuarial Standards Board has approved the development of an ASOP that specifically addresses the 

actuarial certifications for Medicaid managed care capitation rate development under 42 CFR 

438.6(c). It is anticipated that the ASOP will be final by the end of calendar year 2014. 

The Practice Note includes the following definition of actuarial soundness related to Medicaid managed 

cafe capitation rates: 

"Medicaid benefit plan premium rates are "actuarially soundN if, for business in the state for which the 

certification is being prepared and for the period covered by the certification, prOjected capitation 

payments, including expected reinsurance and governmental stop loss cash flows, governmental risk 

adjustment cash flows and investment income, provide for all reasonable, appropriate and attainable 

costs, including health benefits, health benefit settlement expenses, marketing and administrative 

expenses, state-mandated assessments and taxes and the cost of capita!." 

In other words, Medicaid managed care capitation rates are actuarially sound if they provide the 

participating plans an opportunity to cover their projected e)(penses and generate a modest profit if 

they are operated in an efficient manner. 
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For the Medicaid managed care rate setting and certification process in South Carolina, the contracted 

actuaries work closely with SCDHHS and the managed care plans to assure complete and accurate 

information is utilized in the rate setting process. The following provides a general outline of the rate 

setting process: 

.. CoUection of historical utilization and cost experience for the managed care population: The State 

has developed and maintained an encounter data reporting process for the managed care health 

plans. The encounter data represents the claim experience incurred by the managed care 

plans. The encounter data is monitored on a quarterly basis for completeness and accuracy. The 

state's contracted actuaries use the encounter data in the capitation rate setting process. The 

managed care plans are given an opportunity to review the encounter data used in the rate 

calculation. 

Adjust historical data for trend and policy and program changes: The historical data is trended 

forward to reflect medical inflation. The data is further adjusted to reflect policy and program 

changes that have been implemented in the Medicaid managed care program since the historical 

data period. 

Adjust for health plan administration: The historical data is further adjusted to reflect the cost of 

health plan administration services. 

• Documentation: The capitation rate setting process, including assumptions, are outlined in 11 

report along with an actuarial certification. 

~ Communication of results to the state and the contracted health plans: The actuaries present the 

capitation rate development process to the state Department of Health and Human Services and 

the contracted health plans. This allows for a review of the development of the capitation rates by 

interested parties, who typicalfy employ outside actuaries of their own to comment on the 

Department's calculation. 

• Monitoring of health plan financial results: The actuaries regularly review the financial results of 

the contracted health plans. 

The state's contracted actuaries provide on-going support to SCDHHS in the rate approval process. The 

state's contracted actuaries participate in follow-up telephone conversations with CMS to address any 

questions related to the rate certification. 

2) In your testimony you highlight the false illusion that health insurance equals access, and therefore 

leads to health. As the Affondable Care Act further extends health insurance coverage to millions 

of more Americans, your point becomes even more valuable. However, there are soecific issues 

within Medicaid that create a disincentive fur physicians to accept patients with Medicaid 

coverage. 

The federal government has attempted to manage Medicaid expenditures through maintenance of 

effort requirements and by focusing on combating fraud and abuse. 

a. How has the federal maintenance of effort requirements affected state Medicaid rates? 
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Most states must maintain balanced budgets. In times of economic downturn or when 

circumstances may require a state to increase spending or investment in certain programs or 

sectors, states must either draw on reserves, cut stat!! spending across the board or in select 

programs, or raise new revenues through taxes, fees or revenue maximization schemes. 

State Medicaid programs' major cost drivers are eligibility limits, beneficiary enrollment 

rates, provider enrollment, benefit design, service utilization and service reimbursements. 

Total spending may be managed up or down by manipulating each of these drivers. 

MOE requirements on states - including those not expanding - generally do not allow states 

to reduce eligibility limits or implement changes that would restrict or reduce beneficiary 

enrollment rates for a set period of time. This leaves the other drivers as the onlv options to 

manage overall spending. however: 

.. Many benefits are mandatory, and optional services which may be reduced (such as 

home and community based services) are in-fact more cost effective than mandatory 

services; 

.. eMS is applying increased scrutiny to most benefit or service-level reductions or 

restrictions and is in fact requiring states to actually expand services without regard 

to state or federal budget considerations (such as recently requiring Stutn Carolina 

to make adult incontinence supplies available in the state plan rather than as a 

waiver-only service); 

.. Service utilization management programs (such as prior authorization) take 

signiflcant time to implement and have in many cases already reached their 

maximum effectiveness where they are implemented; 

• Medicaid FFS must generally continue to enroll all willing providers regardless of 

their qualitv and cost effectiveness, 

Given the MOE and the other constraints listed above, reducing reimbursement rates 

provides the largest opportunity and quickest means to manage substantial state shortfalls; 

and both expansion states and non-expansion states have consistently cut Medicaid provider 

reimbursement rates over the past several years. Recent studies dearly show that relative 

reimbursement rates are directly tied to the likelihood of accepting Medicaid patients, and 

these reductions undoubtedly have had an effect on access, Fortunately, because South 

carolina has not generally made eligibility or benefit commitments It cannot keep, our 

reimbursement rates remain competitive and we have among the highest rates of physician 

Medicaid participation in the country, 

3) Nearly 10% of Medicaid beneficiaries have third-party coverage, in addition to their Medicaid 

coverage. In these circumstances. the third party payer is required to pay prior to Medicaid, as 

Medicaid, by statute, is the Mpayor of last resort". The Deficit Reduction Act of 2005 (ORA) 

reqUiring states to amend their Medicaid programs with certain provisions to ensure that Medicaid 

Is the pevor of last resort. 
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a. Are you aware of what challenges states continue to face in recovering third -party 

payments? 

South Carolina continues to encounter challenges in collecting from third party carriers. The most 

common reasons that third party carriers will not pay Of will fail to properly process claims include: 

requiring additional infonmation; carriers using numerous locations for claims processing; requiring a 

National Provider Identifier (NPI) to process claims even though Medicaid is not a provider and 

therefore does not have an NPI; invalid prescriber last name; basis of cost; claims previously 

processed; duplicate claims; timely filing not following DRA. Pay and chase requirements make 

recovery more difficult and are less successful than cost avoidance. 

Verifying TPl policies has become challenging for various reasons induding customer 

service representatives who fear that obtaining coverage information violates HIPPA. Verification 

can also be difficult when Medicaid's information does not must match the private insurers records 

exactly. 

TPL recoveries have also been impacted by Supreme Court rulings (Ahlborn and WAS II. E.MA) and 

state legislative changes that limit recovery. 

b. What impediments prevent third party payers from following through on their payments? 

SC Medicaid's paper invoicing is an issue for third party carriers. Electronic billing could expedite 

claims payment. 

In casualty cases, the lack of the prioritization of Medicaid claims or the allocation of settlement 

proceeds to medica! damages negatively impacts recoveries. 

4) How does the Increased use of managed care inflilence TPL issues? 

The Medicaid agency has included a TPL recovery factor in the capitation rate to account for TPL 

coordination of benefits. 

5) The d!'ematic expansion of Medicaid under ACA exacerbates the administration complexity of 

determining eligibility and tracking enrollees. How would this additional complexity influence the 

ability of states to ensure third-parties pay what tliey are responsible for? 

It is imperative that new enrollee infonmation be shared with TPl once eligibility is determined 

so that verification can begin in order to start the cost avoidance process. If TPL has to depend 

on post-payment recoveries, Medicaid will experience increased problems with third party 

reimbursement as we continue to pay and chase. 

The HClilorable Cathy McMorris Rodgers 

1) For many states, innovation and !'eforms in their respective Medicaid programs translate Into not 

only improved quality of care but substantial monetary savings. Section 1115 is intended to allow 

states to test these innovations. Yet, as we know from experience, eMS's implementation of the 
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1115 waiver process has been slow. Are there ways that the waiver process can be updated to 

improve the approval process? For example, if there are demonstration models that eMS has 

previously approved through the waiver process and another state would like to adopt that model. 

should the state have to go through the entire application process to obtain approval for a model 

that already has been approved? 

South Carolina does not currently operate Section 1115 waivers. However, based on experience in 

louisiana as well as conversations with my colleagues, it is dear that 1115 waivers are granted less 

on the needs of a particular state and more so on the policy objectives of the federal administration 

in place at the time. 

The limitation of 1115 waivers is that in complex system improvement, the best solution is rarely 

evident at the outset of the effort. In many cases the root causes of iii problem or set of problems 

cannot even be sufficiently defined, much less best-practice solutions be devised, without significant 

expenditure of effort and resources. 

For this reason, a preferable, albeit more partnership-based approach, would be to view 

demonstrations not as pilots of fully-formulated and unchanging solutions, but instead as a series of 

well-formulated and strategic rapid-cycle performance improvement efforts based on mutually 

negotiated and measurable population health outcomes. While uncertainty regarding the exact 

solutions that will eventually be implemented increases under this model, certainty regarding the 

goals and the progress towards those goals would increase. 

Short of this transformational shift in approach, the suggestion that waivers (1115 or otherwise) that 

have been approved should be, for instance, "conditionally approved" for use in other states is a 

generally a good one. While the nature of 1115 waivers as demonstrations/pilots might suggest that 

other states could receive conditional approval onlV once the demonstration has been renewed in 

the pilot state, other waivers, including common home and community based waivers, etc., which 

are less experimental in nature, should receive immediate conditional approval in other states. One 

potential unintended consequence is that CMS would greatly slow down or restrict innovative 

waivers in one state if it meant that the same waiver would quickly becom .. available for other states. 

The Honorable Gus Bilirallis 

1) Can you talk about your work with states and working with CMS on obtaining an 1115 waiver? 

Florida took almost two years to gat an 1115 Medicaid waiver for a state wide managed (are 

plan. What have other states tried through the waiver process? How was interacting with 

eMS during this process, and how long did it take for eMS to approve the waiver? 

50uth Carolina does not currently operate Section 1115 waivers. However, based on experience 

in Louisiana, one relatively large waiver to improve access to primary care services for a 

previously uninsured population in the greater New Orleans area took approximately 30 days to 

grant, while a relatively small waiver related to assisted living dragged on for three years until it 

was eventually denied. A third effort was in the informal, but often relied upon, pre-application 

stage for approximately a year until it was eventually determined that approval in a formal 

application process would not occur. This occurred under both the Bush and Obama 

administrations. 
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2) The recent Oregon Medicaid study published In the New England Journal of Medicine seemed 

to show that individuals on Medicaid did not have better health outcomes than individuals 

without health insurance. Have you seen the study and what are your thoughts on it? 

Yes, ! have reviewed this study as well as another study published in the New England Journal of 

Medicine "Mortality and Access to Care among Adults after State Medicaid Expansions" also coauthored by Katherine Saicker, Ph.D. I am also familiar with a third study recently published in 

Health Affairs by Kindig and Chen titled "Even as Mortality Fell in most US Counties, Female 

Mortality Nonetheless Rose in 42.8 Percent of Counties from 1992 to 2006". AI! three of these 

studies provide insight and support to a body of evidence related to the Social Determinants of 

Health model. 

As both a policy maker as well as an executive responsible for implementing reimbursement and 

financing strategies that lead to better health, I do believe that insurance is one method of 

promoting better health, but not the only method nor always the most cost effective or efficient 

depending on the covered population. 

For example, what properly constructed insurance (health, life, home, auto, etc.) does do well is 

protect individuals from catastrophic financial loss by spreading the very high costs of rare 

events across a large population. The Oregon study findings indicate that the increased 

coverage provided to the expansion population did indeed provide protection from catastrophic 

financial losses. It can even be inferred that the lower levels of depression found in the 

expansion population could be attributed to the protective effect of coverage on their financial 

status. The finding that there was no additional increase in the use of medication for 

depression, despite the observed decrease in depression, may bolster this argument. 

Several questions not addressed in this article, although Dr. Saicker has referenced them during 

interviews on the subject, are what is the value of that economic protective effect to each 

individual and society, how much should be paid to achieve it, is health insurance the best way 

to do it, and importantly, are there alternative uses of the money elsewhere which produce 

more value - such as the protective effect of extending unemployment benefits beyond tnelr 

current level, or reducing the burden of child care or higher education tuition on low-income 

families? 

As far as improvements on physical health, the data is less dear in the Oregon study. Utilization 

of services increased but measures of health outcomes generally did not. And while the 

Mortality and Access study showed Significant reductions in mortality in expansion states versus 

non-expansion states as a group there was no significant reduction in mortality in two (Maine 

and Arizona) of the three individual states studied, and in fact, the authors identified as a 

limitation that the overall results were driven by the positive results in the largest state (New 

York). 

Further confusing the picture as to the benefits of health insurance are the findings of Kindig 

and Chen in their study of factors aSSOCiated with mortality in all 3,140 counties in the United 

States. They conclude that none of the medical care factors examined in the study, including 

the county specific rates of primary care providers or preventable hospitalizations, nor the 

percentage of uninsured, predicted changes in mortality. 
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Does this suggest insurance does not promote health? No. But the results are consistent with 

Social Determinants of Health model accepted broadly within the public health community, 

which suggests that approximately 20% of overall health is driven by health services and 80% is 

driven by factors such as income, education, race, personal behavior, social supports, 

environment and genetics. . 

In order for insurance to make a difference in health, it first has to ensure good access to health 

services, and this is increasingly becoming problematic, especially in Medicaid as reimbursement 

leads physicians to drop out of the program. This is well documented. 

Once access is gained, the services must be effective. A recent CDC Morbidity and Mortality 

Weekly Review examined hypertension in the United States and reported that over half of 

American adults with hypertension had out-of-control hypertension, and that of these 

individuals 85 percent had health insurance and 89 percent identified having 11 regular source of 

care. Overall, insurance only reduced the probability of being out-of-control from 

approximately 10 percent (uninsured) to approximately 50 percent (insured). 

Why don't insurance and a regular source of care result in better outcomes? There is certainly 

substantial research that a large amount of ineffectual care is being delivered by a poorly 

functioning health system. But more importantly, the good care that is being delivered is often 

short circuited by overwhelming barriers confronting patients related to low education, race, 

lack of family and community supports, etc. 

If a patient leaves a physician's office and doesn't fill a prescription fur lack of understanding of 

its importance or transportation to the pharmacy; or fills the prescription but doesn't take it 

properly again for lack of understanding or support from family members to remember to take 

it; or takes the medication but continues to eat poorly and not exercise; then much of the time 

and money spent on the physician visit as well as the prescription is wasted. 

The ability of insurance to improve health - Medicaid or otherwise - is critically dependent on 

the ability to overcome these social barriers. Yet our excessive spending per capita on health 

insurance and health services continues to crowd out spending and investment on the very 

things - job and wage growth, education, community building and smart infrastructure - that 

drive health the most. 

Our current publicly financed health care system has two major fiaws. First it fails to find the 

people most in need of our services. Most health care providers and insurers passively wait for 

individuals to access care. If an individual presents and needs services, they are delivered and 

paid for. And in our FFS system, even if an individual presents and doesn't need services, they 

still receive them (though not as many) and they are paid fur, But the people that are most in 

need of services are walking around undiagnosed, shut-in their home, or sleeping under a 

bridge. These patients are difficult. They drive provider quality and patient satisfaction scores 

down. They may disturb the other (better paying) patients in waiting rooms. So the system 

doesn't work very hard to find these individuals. We've lost all sense of the mission of public 

health in the United States to reach those in most need and even our public health clinics act 

like physician offices. Flooding the health care system with more money and more patients 

simply reinforces the tendency for the system to take the path of least resistance and highest 

profitability. 
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Once we do get those hard-to-find, difficult-to-treat patients, our system tends to treat them 

like everyone else. A physician on the six-minute primary care visit hamster wheel does not 

have the time, nor the training or system support, to slow down for the one in seven or eight 

patients with significant social barriers that will diminish or eliminate the effectiveness of the 

phYSician visit. In most cases the clinician doesn't even know that they should slow down. 

South Carolina Medicaid is identifying priority populations most in need - our community 

hotspots - and investing in the systems and supports that will make their medical treatment as 

effective and sustainable as possible. This indudes our Birth Outcomes Initiative which has 

already reduced harmful early elective deliveries; our Community Health Worker program to 

help improve treatment plan adherence by bridging the cultural gaps between individuals and 

the health system; our aggressive push to open more convenient after hour access points such 

as CVS Minute Clinics; and our most recent state-wide effort just getting underway to 

significantly lower the cost and improve the clinical outcomes of 10,000 uninsured, chronically 

ill, high utilizers of emergency department services through focused case management, social 

Interventions and community partnerships.